Waddell & Reed Financial Inc.
) first-quarter 2013 earnings from continuing operations reached
63 cents per share, beating the Zacks Consensus Estimate by a
penny. This also compares favorably with earnings of 55 cents in
the prior-year quarter.
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Marginally better-than-expected results were aided by an
augmented top line, partially offset by higher operating
expenses. Further, enhanced assets under management (AUM) and a
solid balance sheet were among the positives. Additionally, gross
sales increased across all the revenue channels, except the
Net income from continuing operations for the reported quarter
came in at $53.9 million, increasing 15.0% from $46.8 million in
the year-ago quarter.
Performance in Detail
Waddell & Reed's operating revenues for the reported quarter
climbed 10.0% to $316.6 million from $287.9 million in the
year-ago quarter. Moreover, operating revenues surpassed the
Zacks Consensus Estimate of $311.0 million.
Overall, gross sales increased 7.6% year over year to $6.8
billion. Redemptions were $4.7 billion, down 6.4% from $5.0
billion in the prior-year quarter. Net inflows were $2.1 billion,
up 61.3% year over year.
, revenues improved 13.8% year over year to $87.2 million. Gross
sales surged 18.8% to $1.3 billion from $1.1 billion in the
year-ago quarter. Net inflows grew 20.3% to $190 million from
$158 million in the prior-year quarter.
, revenues improved 8.3% year over year to $48.2 million. Gross
sales also rose 11.5% year over year to $5.0 billion. Net inflows
grew to $2.0 billion from $970 million in the year-ago period.
Gross sales at the
came in at $430 million, plunging 37.0% from $682 million in the
year-ago quarter. Further, the segment witnessed net outflows of
$39 million compared with inflows of $175 million in the year-ago
Waddell & Reed's operating expenses increased 8.1% year over
year to $233.6 million. This was primarily due to a rise in
underwriting and distribution expenses along with higher
compensation and related costs.
Operating margin of 26.2% improved from 25.0% in the prior-year
As of Mar 31, 2013, AUM totaled $103.8 billion, up 10.7% from
$93.8 billion as of Mar 31, 2012.
As of Mar 31, 2013, cash and cash equivalents and investment
securities were $566 million. Moreover, long-term debt totaled
$190 million and stockholders' equity was recorded at $553
During the first quarter, Waddell & Reed repurchased 82,000
million shares at an aggregate price of $3.4 million.
Waddell & Reed's sustained growth and its history of boosting
shareholders' value through meaningful capital deployment
activities are impressive. However, the persistently volatile
equity markets and significant intangibles on the company's
balance sheet are expected to mar its profitability in the
Although we are optimistic about the competitive ranking of
Waddell & Reed's funds and its efforts to control cost in the
upcoming quarters, irregular investment performance and rising
competition keep us cautious.
Similar to Waddell & Reed, earnings per share for
The Blackstone Group L.P.
Ameriprise Financial Inc.
) surpassed earnings estimates. The outperformance by these
companies was attributed to revenue growth, partially offset by
increased operating expenses.
Waddell & Reed currently carries a Zacks Rank #2 (Buy).