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Waddell & Reed Financial Inc. reported fourth-quarter 2016 adjusted earnings of 48 cents per share, easily surpassing the Zacks Consensus Estimate of 41 cents. However, it compared unfavorably with the year-ago earnings of 76 cents. Notably, results for the prior-year quarter did not include any adjustments.
Lower expenses and a fall in net outflows were primarily aided the results. Also, balance sheet remained strong. However, a decline in revenues and lower assets under management (AUM) were the undermining factors.
After considering certain non-recurring items, net income attributable to Waddell & Reed totaled $22.4 million, compared with $62.9 million in the prior-year quarter.
The company also reported full-year 2016 adjusted earnings of $2.14 per share, surpassing the Zacks Consensus Estimate of $2.11. However, the reported figure was down 27.2% year over year. Also, net income attributable to Waddell & Reed (GAAP basis) came in at $146.9 million, down 40.2% year over year.
Operating revenues for the quarter fell 18.9% year over year to $292.9 million, reflecting a decline in all components. However, it surpassed the Zacks Consensus Estimate of $288.8 million.
For 2016, operating revenues came in at $1.24 billion, surpassing the Zacks Consensus Estimate of $1.23 billion. However, the figure was down 18.3% year over year.
Gross sales for the quarter declined 37.3% year over year to $2.72 billion. Redemptions fell 24% year over year to $7.10 billion. However, net outflows were $4.39 billion at the quarter end, down from $5.01 billion at the end of the prior-year quarter.
Operating expenses fell 5.3% year over year to $255.5 million. The decline was primarily due to a fall in underwriting and distribution expenses and general and administrative costs.
Operating margin was 12.8%, down from 25.3% a year ago.
As of Dec 31, 2016, AUM totaled $80.52 billion, down 22.9% from the Dec 31, 2015 level. Market depreciation, partially offset by a fall in net outflows, was responsible for the decline.
As of Dec 31, 2016, the company’s cash and cash equivalents as well as investment securities totaled $883.9 million. Moreover, long-term debt totaled $189.6 million and stockholders’ equity was recorded at $844 million.
Deteriorating Performance of the Distribution Channels
At Retail Broker-Dealer (previously referred as “Advisors” channel), gross sales decreased 9.6% year over year to $1.10 billion. Net outflows totaled $750 million, up drastically from the year-ago figure of $203 million.
At Retail Unaffiliated Distribution (previously referred to as "Wholesale” channel), gross sales declined 41.3% year over year to $1.37 billion. However, net outflows amounted to $3 billion, down 37.2% year over year.
Gross sales at the Institutional channel were $242 million, declining 68.7% from the year-ago quarter. The segment witnessed net outflows of $629 million, up significantly from the prior-year quarter.
Share Repurchase
Waddell & Reed bought back 90,692 shares for $1.8 million during the quarter. Overall, the company returned $39.9 million to its shareholders in the form of dividends and share repurchases during the quarter.
Our Viewpoint
Waddell & Reed’s Project E initiative is likely to boost bottom-line growth in the long run. Also, the company’s continued investments in the Retail-Broker Dealer channel will help boost revenues, inflows and AUM, going forward.
However, declining AUM levels due to net outflows remain a major concern. Also, as the company plans on investing in technology initiatives with an intention to modernize and optimize its operations, expenses might rise.
Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise
BlackRock, Inc. (BLK - Free Report) reported fourth-quarter 2016 adjusted earnings of $5.14 per share, which handedly surpassed the Zacks Consensus Estimate of $5.02. Moreover, the bottom line came in 8% higher than the year-ago quarter. The better-than-expected number was primarily driven by a decline in total expenses.
Janus Capital Group, Inc. reported fourth-quarter 2016 adjusted earnings per share of 20 cents, lagging the Zacks Consensus Estimate of 24 cents. A fall in revenues and higher expenses were primarily responsible for the lower-than-expected results.
The Blackstone Group L.P. (BX - Free Report) reported fourth-quarter 2016 economic net income of 68 cents per share, which surpassed the Zacks Consensus Estimate of 63 cents. Better-than-expected quarterly results were attributable to a significant increase in revenues.
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Waddell & Reed's (WDR) Q4 Earnings Beat, Outflows Decline
Waddell & Reed Financial Inc. reported fourth-quarter 2016 adjusted earnings of 48 cents per share, easily surpassing the Zacks Consensus Estimate of 41 cents. However, it compared unfavorably with the year-ago earnings of 76 cents. Notably, results for the prior-year quarter did not include any adjustments.
Lower expenses and a fall in net outflows were primarily aided the results. Also, balance sheet remained strong. However, a decline in revenues and lower assets under management (AUM) were the undermining factors.
After considering certain non-recurring items, net income attributable to Waddell & Reed totaled $22.4 million, compared with $62.9 million in the prior-year quarter.
The company also reported full-year 2016 adjusted earnings of $2.14 per share, surpassing the Zacks Consensus Estimate of $2.11. However, the reported figure was down 27.2% year over year. Also, net income attributable to Waddell & Reed (GAAP basis) came in at $146.9 million, down 40.2% year over year.
Revenues, Expenses & AUM Decline
Operating revenues for the quarter fell 18.9% year over year to $292.9 million, reflecting a decline in all components. However, it surpassed the Zacks Consensus Estimate of $288.8 million.
For 2016, operating revenues came in at $1.24 billion, surpassing the Zacks Consensus Estimate of $1.23 billion. However, the figure was down 18.3% year over year.
Gross sales for the quarter declined 37.3% year over year to $2.72 billion. Redemptions fell 24% year over year to $7.10 billion. However, net outflows were $4.39 billion at the quarter end, down from $5.01 billion at the end of the prior-year quarter.
Operating expenses fell 5.3% year over year to $255.5 million. The decline was primarily due to a fall in underwriting and distribution expenses and general and administrative costs.
Operating margin was 12.8%, down from 25.3% a year ago.
As of Dec 31, 2016, AUM totaled $80.52 billion, down 22.9% from the Dec 31, 2015 level. Market depreciation, partially offset by a fall in net outflows, was responsible for the decline.
As of Dec 31, 2016, the company’s cash and cash equivalents as well as investment securities totaled $883.9 million. Moreover, long-term debt totaled $189.6 million and stockholders’ equity was recorded at $844 million.
Deteriorating Performance of the Distribution Channels
At Retail Broker-Dealer (previously referred as “Advisors” channel), gross sales decreased 9.6% year over year to $1.10 billion. Net outflows totaled $750 million, up drastically from the year-ago figure of $203 million.
At Retail Unaffiliated Distribution (previously referred to as "Wholesale” channel), gross sales declined 41.3% year over year to $1.37 billion. However, net outflows amounted to $3 billion, down 37.2% year over year.
Gross sales at the Institutional channel were $242 million, declining 68.7% from the year-ago quarter. The segment witnessed net outflows of $629 million, up significantly from the prior-year quarter.
Share Repurchase
Waddell & Reed bought back 90,692 shares for $1.8 million during the quarter. Overall, the company returned $39.9 million to its shareholders in the form of dividends and share repurchases during the quarter.
Our Viewpoint
Waddell & Reed’s Project E initiative is likely to boost bottom-line growth in the long run. Also, the company’s continued investments in the Retail-Broker Dealer channel will help boost revenues, inflows and AUM, going forward.
However, declining AUM levels due to net outflows remain a major concern. Also, as the company plans on investing in technology initiatives with an intention to modernize and optimize its operations, expenses might rise.
Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise
Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise | Waddell & Reed Financial, Inc. Quote
Currently, Waddell & Reed carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Investment Managers
BlackRock, Inc. (BLK - Free Report) reported fourth-quarter 2016 adjusted earnings of $5.14 per share, which handedly surpassed the Zacks Consensus Estimate of $5.02. Moreover, the bottom line came in 8% higher than the year-ago quarter. The better-than-expected number was primarily driven by a decline in total expenses.
Janus Capital Group, Inc. reported fourth-quarter 2016 adjusted earnings per share of 20 cents, lagging the Zacks Consensus Estimate of 24 cents. A fall in revenues and higher expenses were primarily responsible for the lower-than-expected results.
The Blackstone Group L.P. (BX - Free Report) reported fourth-quarter 2016 economic net income of 68 cents per share, which surpassed the Zacks Consensus Estimate of 63 cents. Better-than-expected quarterly results were attributable to a significant increase in revenues.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>