It has been about a month since the last earnings report for Waddell & Reed Financial (WDR). Shares have added about 5.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Waddell & Reed due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Waddell & Reed Q2 Earnings Beat, Revenues Decline Y/Y
Waddell & Reed’s second-quarter 2020 earnings of 38 cents per share outpaced the Zacks Consensus Estimate of 34 cents. However, the bottom line declined 16% year over year.
The results reflected lower operating expenses. However, a decline in revenues and lower AUM balance owing to substantial outflows were major undermining factors.
Net income attributable to Waddell & Reed totaled $24.8 million, down 27% from the prior-year quarter.
Revenues & Expenses Down
Revenues declined 11% year over year to $240 million. A fall in all revenue components was witnessed during the quarter. Further, the figure lagged the Zacks Consensus Estimate of $251.7 million.
Gross sales grew 1% year over year to $2.2 billion. Redemptions were $3.6 billion, down from $4.5 billion recorded in the prior-year quarter.
Operating expenses fell 5% on a year-over-year basis to $216.4 million.
Adjusted operating margin was 9.8%, down from 15.3% in the year-ago quarter.
As of Jun 30, 2020, AUM totaled $65 billion, down 10% year over year. Net outflows of $1.4 billion were recorded in the quarter.
As of Jun 30, 2020, the company’s cash and cash equivalents, and investment securities totaled $775.8 million. Stockholders’ equity was $776.7 million.
Performance of Distribution Channels
At the Unaffiliated channel, gross sales improved 15% year over year to $1.49 billion. Net outflows were $484 million compared with $847 million recorded in the year-ago quarter.
Gross sales at the Institutional channel were $52 million, down 4% from the year-ago quarter. The segment’s net outflows were $128 million compared with $361 million a year ago.
At the Wealth Management channel, gross sales decreased 18% year over year to $649 million. Net outflows totaled $837 million, up 27% from a year ago.
Share Repurchase Update
Waddell & Reed bought back 1.5 billion shares for $18.1 million during the quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a flat trend in estimates review.
VGM Scores
At this time, Waddell & Reed has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Waddell & Reed has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Waddell Reed Financial, Inc. (WDR): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
