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Investing.com -- Morgan Stanley (NYSE:MS) has named KKR & Co. Inc. (NYSE:KKR) its new top pick in the brokers, asset managers, and exchanges category, replacing CME Group (NASDAQ:CME).
The brokerage maintained an “overweight” rating and set a price target of $150, implying a 13% upside from KKR’s closing price of $134.53 on July 2.
Analysts cited improving macroeconomic conditions, including tariff de-escalation, equity market strength, and normalized volatility, as catalysts for a capital markets recovery.
These trends are expected to accelerate private markets activity, supporting stronger dealmaking and benefiting KKR’s earnings outlook.
The brokerage said KKR is more leveraged to capital markets than peers, positioning it to outperform in a rebound scenario.
KKR is projected to deliver EPS of $4.93 in 2025 and $6.42 in 2026, with a compound annual growth rate of roughly 20% from 2024 through 2027.
The brokerage also expects 14% compound annual growth in fee-paying assets under management (FPAUM) during that period. Fundraising is forecast at $97.6 billion in 2025 and $107 billion in 2026.
Morgan Stanley’s model sees 16% annual growth in fee-related earnings and a 19% compound growth rate in performance fees through 2027.
The report notes gross performance fees are expected to rise from 1.62% of beginning FPAUM in 2025 to 2.36% in 2026. FRE margins are estimated to expand from 68.7% in 2025 to 70.6% in 2027.
KKR shares have fallen 9% year-to-date, underperforming the alternative asset manager group, which is down 2%, and the S&P 500, which is up 5%. Nevertheless, Morgan Stanley believes the stock is set for a rebound.
The analysts argue that capital markets momentum provides confidence in estimate achievability and may lead to upward revisions.
The firm also highlighted KKR’s diversification across private credit, infrastructure, insurance, and private wealth, along with geographic expansion in Asia-Pacific and retirement markets. This mix is seen as a strength that supports a sustainable long-term growth outlook.
Morgan Stanley values KKR at 23.4 times 2026 EPS, noting that this reflects a premium to historical levels due to its diversified business model and growth potential.
In its base case, KKR’s 2026 EPS of $6.42 supports a price target of $150. The bull case assumes EPS of $9.19 and a price of $226, while the bear case assumes $4.00 in EPS and a target of $50.
CME Group, now removed as top pick, remains rated Overweight with a $304 price target.
While the brokerage still sees CME as a defensive asset amid persistent macro uncertainty, analysts believe KKR offers more upside amid a capital markets recovery.