Markets
WDR

Waddell & Reed (WDR) Beats on Q4 Earnings, Stock Falls 2.5%

Shares of Waddell & Reed Financial Inc.WDR declined 2.5% following the release of its fourth-quarter 2017 results. Adjusted earnings of 48 cents per share outpaced the Zacks Consensus Estimate of 45 cents. Also, it compared favorably with the year-ago quarter's adjusted earnings of 35 cents.

Despite improved quarterly performance, the fall in Waddell & Reed's share price reflects overall dismal market performance.

Results benefited from a modest improvement in revenues and assets under management (AUM). Also, decline in operating expenses was a tailwind.

After considering the charges related to new pension accounting method and the tax act, net income attributable to Waddell & Reed totaled $29.8 million, up 2.5% from the prior-year quarter.

For 2017, adjusted earnings per share of $1.69 beat the Zacks Consensus Estimate of $1.58 but were down 11.1% year over year. After taking into consideration the above-mentioned charges, net income attributable to Waddell & Reed was $141.3 million, down 9.8% from the last year.

Marginal Rise in AUM & Revenues, Expenses Fall

Operating revenues in the quarter rose marginally year over year to $294.5 million, reflecting a rise in investment management fees. Also, it surpassed the Zacks Consensus Estimate of $288.8 million.

For 2017, operating revenues declined 6.6% from the prior year to $1.16 billion. Also, it compared unfavorably with the Zacks Consensus Estimate of $1.5 billion.

Gross sales increased modestly year over year to $2.72 billion. Redemptions declined 23.1% to $5.46 billion. Also, net outflows were $2.74 billion at the quarter end, down from $4.39 billion at the end of the prior-year quarter.

Operating expenses fell 2.4% year over year to $239.2 million. The decrease was primarily due to lower underwriting and distribution costs and absence of intangible impairment expenses.

Operating margin was 18.8%, up from 16.4% a year ago.

As of Dec 31, 2017, AUM totaled $81.08 billion, reflecting a slight rise from the Dec 31, 2016 level.

As of Dec 31, 2017, the company's cash and cash equivalents as well as investment securities totaled $908.3 million. Long-term debt was $94.8 million and stockholders' equity was $872.9 million.

Performance of Distribution Channels

At the Retail Broker-Dealer channel, gross sales declined 2.2% year over year at $1.08 billion. Also, net outflows totaled $1.27 billion, increasing from $750 million in the year-ago quarter.

At the Retail Unaffiliated Distribution channel, gross sales increased 14.9% year over year to $1.58 billion. Also, net outflows were $1.02 billion, down 66.1%.

Gross sales at the Institutional channel were $66 million, plunging 72.7% from the year-ago quarter. The segment witnessed net outflows of $455 million, down 27.6% from the prior-year quarter.

Share Repurchases

Waddell & Reed bought back 937.9 million shares for $20.1 million during the quarter. The company returned a total of $58.5 million to its shareholders in the form of dividends and share repurchases during the quarter.

Our Viewpoint

Waddell & Reed has been facing pressure on its revenues, which will continue to hamper its financials in the near term. Although the company is taking initiatives through Project E to boost its top line, it will take a while to witness a rebound. Nevertheless, expenses remain manageable. Also, its continued investments in the Retail-Broker Dealer channel might help boost revenues and AUM in the future.

Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise

Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise | Waddell & Reed Financial, Inc. Quote

Waddell & Reed sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Performance of Other Investment Managers and Upcoming Release

BlackRock, Inc.'s BLK fourth-quarter 2017 adjusted earnings of $6.24 per share outpaced the Zacks Consensus Estimate of $6.08. Results benefited from an improvement in revenues, rise in AUM and steady long-term inflows. However, increase in operating expenses acted as a headwind.

Ameriprise Financial Inc.'s AMP fourth-quarter 2017 adjusted operating earnings per share of $3.26 comfortably surpassed the Zacks Consensus Estimate of $3.09. Results benefited from an improvement in revenues as well as growth in AUM and assets under administration. However, a rise in expenses acted as a headwind.

The Blackstone Group L.P. BX is scheduled to come up with its financial numbers on Feb 1.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Waddell & Reed Financial, Inc. (WDR): Free Stock Analysis Report

AMERIPRISE FINANCIAL SERVICES, INC. (AMP): Free Stock Analysis Report

The Blackstone Group L.P. (BX): Free Stock Analysis Report

BlackRock, Inc. (BLK): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

WDR BX BLK AMP

Other Topics

Earnings Stocks