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WisdomTree (WETF) Q3 Earnings In Line, Revenues Decline
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Shares of WisdomTree Investments, Inc. declined nearly 7.5% following its third-quarter 2016 earnings release. The New York-based exchange traded fund (‘ETF’) and exchange-traded product (‘ETP’) sponsor and asset manager reported earnings of 6 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line plummeted 64.7% from the prior-year quarter.
Despite meeting the market expectation, the stock fell due to concerns over its revenue plunge. However, expense control was on the positive side.
Net income was $8.0 million, down 65.7% year over year.
Total revenue was $51.8 million, down 35.9% year-over-year. The decline was primarily due to lower assets under management (AUM), associated with the company’s two largest ETFs – HEDJ and DXJ. Also, average U.S. advisory fee was down to 0.51% from 0.52% reported in the previous quarter due to product mix. However, the top line came in slightly above the Zacks Consensus Estimate of $51.4 million.
Expenses were $37.6 million, down 8.9% year over year. This fall is largely attributable to lower compensation, and professional and consulting fees.
Segment Performance
US Listed Business: The segment’s total revenue for the quarter was nearly $50 million, down 37.1% from the prior-year quarter. Gross margin came in at 80.5%, down from 87.2% in the year-ago quarter. The contraction was due to lower average AUM as well as the costs incurred on additional ETF launches.
As of Sep 30, 2016, U.S. listed AUM was recorded at $37.7 billion, down 28.9% year over year. The decline was mainly due to net outflows in the company’s two largest funds.
European Listed Business: The segment’s total revenue was $1.8 million, up 38.5% from the prior-year quarter.
The company recorded European listed AUM of $1.0 billion as of Sep 30, 2016, up 46.4% from year-ago quarter, primarily due to net inflows.
Balance Sheet
WisdomTree had cash and cash equivalents of $178.1 million as of Sep 30, 2016, compared with $210.1 million as of Dec 31, 2015. Investments totaled to $16.2 million at the end of the quarter.
The company’s stockholders’ equity was $205.8 million compared with $234.5 million as of Dec 31, 2015.
Our Viewpoint
Though WisdomTree’s results do not reflect a strong quarter, we remain optimistic about its performance in the future due to its expense management skills. We believe that the company’s efforts in innovations and new product offerings, diverse footprint, new sales and distribution channels, position it favorably for the long run.
However, sluggish macroeconomic environment and stringent regulations might put the company’s financials under pressure in the near term.
The Charles Schwab Corporation (SCHW - Free Report) third-quarter 2016 adjusted earnings of 34 cents per share outpaced the Zacks Consensus Estimate by a penny. Results excluded litigation proceeds of nearly $14 million, related to the company’s non-agency residential mortgage-backed securities portfolio.
Revenue growth, primarily driven by increase in equity market volatility, lower level of fee waivers and stable provisions acted as tailwinds. Also, there was a significant rise in total client assets and new brokerage accounts. However, higher expenses remained a concern.
TD Ameritrade Holding Corporation’s (AMTD) reported its fourth-quarter fiscal 2016 (ending Sep 30) earnings of 35 cents per share, lagging the Zacks Consensus Estimate of 38 cents. Also, the reported figure was down 12.5% from the prior-year quarter.
Net revenue was down primarily due to a fall in commissions and transaction fees. Also, higher expenses and continued decline in net interest margin (NIM) added to the downside. Further, the company recorded a decline in average client trades per day while the total client asset balances witnessed improvement.
Interactive Brokers Group, Inc. (IBKR - Free Report) reported adjusted earnings per share of 30 cents, lagging the Zacks Consensus Estimate by 2 cents. Moreover, earnings compared unfavorably with the prior-year quarter tally of 35 cents.
Decline in revenues, increased expenses and dismal performance of the Market Making segment led to the unfavorable result. However, on the upside, the company experienced notable increase in net interest income, gain on currency diversification strategy and growth in customer equity.
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WisdomTree (WETF) Q3 Earnings In Line, Revenues Decline
Shares of WisdomTree Investments, Inc. declined nearly 7.5% following its third-quarter 2016 earnings release. The New York-based exchange traded fund (‘ETF’) and exchange-traded product (‘ETP’) sponsor and asset manager reported earnings of 6 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line plummeted 64.7% from the prior-year quarter.
Despite meeting the market expectation, the stock fell due to concerns over its revenue plunge. However, expense control was on the positive side.
Net income was $8.0 million, down 65.7% year over year.
Revenues & Expenses Down
Total revenue was $51.8 million, down 35.9% year-over-year. The decline was primarily due to lower assets under management (AUM), associated with the company’s two largest ETFs – HEDJ and DXJ. Also, average U.S. advisory fee was down to 0.51% from 0.52% reported in the previous quarter due to product mix. However, the top line came in slightly above the Zacks Consensus Estimate of $51.4 million.
Expenses were $37.6 million, down 8.9% year over year. This fall is largely attributable to lower compensation, and professional and consulting fees.
Segment Performance
US Listed Business: The segment’s total revenue for the quarter was nearly $50 million, down 37.1% from the prior-year quarter. Gross margin came in at 80.5%, down from 87.2% in the year-ago quarter. The contraction was due to lower average AUM as well as the costs incurred on additional ETF launches.
As of Sep 30, 2016, U.S. listed AUM was recorded at $37.7 billion, down 28.9% year over year. The decline was mainly due to net outflows in the company’s two largest funds.
European Listed Business: The segment’s total revenue was $1.8 million, up 38.5% from the prior-year quarter.
The company recorded European listed AUM of $1.0 billion as of Sep 30, 2016, up 46.4% from year-ago quarter, primarily due to net inflows.
Balance Sheet
WisdomTree had cash and cash equivalents of $178.1 million as of Sep 30, 2016, compared with $210.1 million as of Dec 31, 2015. Investments totaled to $16.2 million at the end of the quarter.
The company’s stockholders’ equity was $205.8 million compared with $234.5 million as of Dec 31, 2015.
Our Viewpoint
Though WisdomTree’s results do not reflect a strong quarter, we remain optimistic about its performance in the future due to its expense management skills. We believe that the company’s efforts in innovations and new product offerings, diverse footprint, new sales and distribution channels, position it favorably for the long run.
However, sluggish macroeconomic environment and stringent regulations might put the company’s financials under pressure in the near term.
WISDOMTREE INV Price, Consensus and EPS Surprise
WISDOMTREE INV Price, Consensus and EPS Surprise | WISDOMTREE INV Quote
Currently, WisdomTree carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Competitive Landscape
The Charles Schwab Corporation (SCHW - Free Report) third-quarter 2016 adjusted earnings of 34 cents per share outpaced the Zacks Consensus Estimate by a penny. Results excluded litigation proceeds of nearly $14 million, related to the company’s non-agency residential mortgage-backed securities portfolio.
Revenue growth, primarily driven by increase in equity market volatility, lower level of fee waivers and stable provisions acted as tailwinds. Also, there was a significant rise in total client assets and new brokerage accounts. However, higher expenses remained a concern.
TD Ameritrade Holding Corporation’s (AMTD) reported its fourth-quarter fiscal 2016 (ending Sep 30) earnings of 35 cents per share, lagging the Zacks Consensus Estimate of 38 cents. Also, the reported figure was down 12.5% from the prior-year quarter.
Net revenue was down primarily due to a fall in commissions and transaction fees. Also, higher expenses and continued decline in net interest margin (NIM) added to the downside. Further, the company recorded a decline in average client trades per day while the total client asset balances witnessed improvement.
Interactive Brokers Group, Inc. (IBKR - Free Report) reported adjusted earnings per share of 30 cents, lagging the Zacks Consensus Estimate by 2 cents. Moreover, earnings compared unfavorably with the prior-year quarter tally of 35 cents.
Decline in revenues, increased expenses and dismal performance of the Market Making segment led to the unfavorable result. However, on the upside, the company experienced notable increase in net interest income, gain on currency diversification strategy and growth in customer equity.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>