On Jul 8, 2014, we issued an updated research report on
Waddell & Reed Financial, Inc.
). All the business segments of this Overland Park, KS-based
investment manager are performing well, driven by strong inflows.
However, rising operating expenses continue to put huge pressure on
the company's financials.
The business segments of Waddell & Reed - advisor channel,
wholesale channel and institution channel - witnessed better net
inflows in first-quarter 2014 compared with the prior-year quarter.
The consistently strong investment performance resulted in solid
growth trajectory for the company. Notably, further improvement in
the equity market is expected to generate more inflows for the
company, which will drive profitability in the long run.
Nevertheless, escalating operating expenses remain a serious
concern for the company. Steady increase in compensations and
related costs is a major reason behind the mounting expenses. Going
forward, regulatory changes and steeper compensation costs are
likely to push the expense level even further.
Over the past 60 days, the Zacks Consensus Estimate for 2014
remained unchanged at $3.75 per share, while it declined 0.7% to
$4.36 per share for 2015.
Waddell & Reed currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Some better-ranked finance stocks include
Fortress Investment Group LLC
Kohlberg Kravis Roberts & Co.
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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