Strong performance owing to consistent inflows across all the
Waddell & Reed Financial Inc.
) first-quarter 2014 earnings per share of 88 cents, which
outpaced the Zacks Consensus Estimate of 85 cents. The reported
figure was also up 39.7% from 63 cents earned in the year-ago
quarter. Moreover, the results continued the company's earnings
streak of 2013.
Waddell & Reed's top-line growth continued, aided by strong
inflows. Consistent rise in assets under management (AUM), strong
balance sheet position and steady capital deployment activities
were the quarterly tailwinds. However, rising expenses was a
Net income for the said quarter came in at $74.9 million, up
39.0% year over year.
Waddell & Reed's operating revenues grew 23.3% from the
prior-year quarter to $390.4 million. Moreover, it cruised ahead
of the Zacks Consensus Estimate of $380.0 million.
Overall, gross sales were $10.0 billion, up 47.7% year over year.
Redemptions were $5.3 billion, up 14.4% from the prior-year
quarter. Moreover, net inflows were $4.7 billion at the
quarter-end, increasing substantially from $2.1 billion as of Mar
At the Advisors channel, gross sales rose 10.1% year over year to
$1.4 billion. Net inflows were $217 million, rising 14.2% from
the year-earlier quarter.
At the Wholesale channel, gross sales increased 39.2% from the
prior-year quarter to $7.0 billion. Net inflows were $3.6
billion, up 82.8% year over year.
Gross sales at the Institutional channel came in at $1.6 billion,
up significantly from $430 million in the year-ago quarter.
Further, the segment witnessed net inflows of $875 million versus
outflows of $39 million as of Mar 31, 2013.
Operating expenses rose 17.2% year over year to $273.8 million.
This was primarily due to increase in underwriting and
distribution expenses, compensation and related costs as well as
general and administrative costs.
Operating margin came in at 29.9%, up from 26.2% in the
As of Mar 31, 2014, AUM totaled $131.4 billion, up 26.6% from Mar
At the end of the reported quarter, cash and cash equivalents as
well as investment securities were $720.6 million. Moreover,
long-term debt totaled $190.0 million and stockholders' equity
was recorded at $729.5 million.
In the reported quarter, Waddell & Reed bought back 280.2
million shares for $17.7 million.
Overall, Waddell & Reed returned $46.7 million to
shareholders in the form of dividends and share repurchases
during the quarter.
Despite volatility in the equity market, Waddell & Reed has
recorded consistent inflows in the reported quarter. Therefore,
going forward, we expect this trend to continue on the back of a
modest improvement in the overall market scenario. However,
rising expenses and a competitive landscape will tend to
challenge the company's top-line growth.
At present, Waddell & Reed has a Zacks Rank #2 (Buy).
Performance of Other Investment Managers
The first-quarter 2014 results of
Ameriprise Financial, Inc.
Affiliated Managers Group Inc.
) surpassed the Zacks Consensus Estimate, primarily driven by
top-line growth but partially offset by higher expenses. Further,
the three companies recorded impressive AUM growth as well.
AFFIL MANAGERS (AMG): Free Stock Analysis
AMERIPRISE FINL (AMP): Free Stock Analysis
BLACKROCK INC (BLK): Free Stock Analysis
WADDELL&REED -A (WDR): Free Stock Analysis
To read this article on Zacks.com click here.