Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Waddell & Reed Financial Inc.’s (WDR - Analyst Report) second-quarter 2013 earnings came in at 67 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. This also compares favorably with the prior-year quarter figure of 48 cents.

Notably, results for the reported quarter include a charge of $8.6 million associated with the launch of Ivy High Income Opportunities Fund – the company’s first closed-end fund. Considering the aforementioned one-time expenditure, the net income figure came in at $52.0 million,  increasing 24.7% from $41.7 million in the year-ago quarter.

The year-over-year improvement was aided by top-line growth, 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 revenue channels, except the Institutional channel.

Performance in Detail

Waddell & Reed’s operating revenues climbed 14.5% to $331.7 million from $289.7 million in the year-ago quarter. Moreover, operating revenues surpassed the Zacks Consensus Estimate of $329.0 million.

Overall, gross sales increased 14.9% year over year to $6.8 billion. Redemptions were $5.9 billion, up 5.8% from $5.6 billion in the prior-year quarter. Net inflows were $935 million, up significantly from the prior-year quarter.

At the Advisors channel, gross sales rose 17.7% to $1.4 billion from $1.2 billion in the year-ago quarter. Net inflows grew 41.5% to $259 million from $183 million in the prior-year quarter.

At the Wholesale channel, gross sales also rose 22.3% year over year to $5.0 billion. Net inflows grew to $1.1 billion from $626 million in the year-ago period.

Gross sales at the Institutional channel came in at $379 million, plunging 39.4% from $625 million in the year-ago quarter. Further, the segment witnessed net outflows of $432 million, compared with outflows of $433 million in the year-ago quarter.

Waddell & Reed’s operating expenses rose 11.0% year over year to $246.7 million. This was primarily due to increases in underwriting and distribution expenses, compensation and related costs as well as general and administrative costs.

Operating margin of 25.6% increased from 23.3% in the prior-year quarter.

As of Jun 30, 2013, AUM totaled $104.3 billion, up 17.1% from $89.1 billion as of Jun 30, 2012.

Balance Sheet

As of Jun 30, 2013, cash and cash equivalents and investment securities were $547 million. Moreover, long-term debt totaled $190 million and stockholders’ equity was recorded at $563 million.

Share Repurchase

During the reported quarter, Waddell & Reed repurchased 789,000 shares.

Our Take

Waddell & Reed’s sustained growth and its history of boosting shareholder value through meaningful capital deployment activities are impressive. 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, significant intangibles on its balance sheet and rising competition keep us cautious.

Similar to Waddell & Reed, earnings per share for BlackRock, Inc. (BLK - Analyst Report), The Blackstone Group L.P. (BX - Analyst Report) and Ameriprise Financial Inc. (AMP - Analyst Report) also surpassed the respective Zacks Consensus Estimate. The outperformance by these companies was attributable to revenue growth, partially offset by increased operating expenses.

Waddell & Reed currently carries a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%