A month has gone by since the last earnings report for Waddell & Reed Financial, Inc. . Shares have added about 9.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Waddell & Reed's Q4 Earnings Beat, Outflows Decline
Waddell & Reed reported fourth-quarter 2016 adjusted earnings of $0.48 per share, easily surpassing the Zacks Consensus Estimate of $0.41. However, it compared unfavorably with the year-ago earnings of $0.76. 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 reported 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, 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 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.
Outlook
For 2017, management targets to maintain fixed costs at second half 2016 levels.
Further, ongoing expenses for Project E will be recorded in indirect distribution costs and are expected around $7 million during 2017. These incremental expenses relate to costs of the fund screening and model portfolios. Moreover, the company will record one-time implementation costs of $4 million. This will be incurred to get all the platforms in place by mid-2017.
Management expects spending nearly $8–$10 million throughout 2018 related to implementation of DOL regulation.
Beginning in 2017, the company’s effective tax rate will be impacted by a new accounting standard that requires the recognition of tax shortfalls or excess tax benefits related to employee share based payments through the income statement.
How Have Estimates Been Moving Since Then?
Following the release , investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted 6.25% downward due to these changes.
VGM Scores
At this time, Waddell & Reed's stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Waddell & Reed (WDR) Up 9.9% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Waddell & Reed Financial, Inc. . Shares have added about 9.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Waddell & Reed's Q4 Earnings Beat, Outflows Decline
Waddell & Reed reported fourth-quarter 2016 adjusted earnings of $0.48 per share, easily surpassing the Zacks Consensus Estimate of $0.41. However, it compared unfavorably with the year-ago earnings of $0.76. 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 reported 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, 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 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.
Outlook
For 2017, management targets to maintain fixed costs at second half 2016 levels.
Further, ongoing expenses for Project E will be recorded in indirect distribution costs and are expected around $7 million during 2017. These incremental expenses relate to costs of the fund screening and model portfolios. Moreover, the company will record one-time implementation costs of $4 million. This will be incurred to get all the platforms in place by mid-2017.
Management expects spending nearly $8–$10 million throughout 2018 related to implementation of DOL regulation.
Beginning in 2017, the company’s effective tax rate will be impacted by a new accounting standard that requires the recognition of tax shortfalls or excess tax benefits related to employee share based payments through the income statement.
How Have Estimates Been Moving Since Then?
Following the release , investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted 6.25% downward due to these changes.
Waddell & Reed Financial, Inc. Price and Consensus
Waddell & Reed Financial, Inc. Price and Consensus | Waddell & Reed Financial, Inc. Quote
VGM Scores
At this time, Waddell & Reed's stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.