It has been about a month since the last earnings report for Waddell & Reed Financial . Shares have added about 1% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Waddell & Reed Beats on Q2 Earnings & Revenue Estimates
Waddell & Reed’s second-quarter 2018 earnings of 56 cents per share outpaced the Zacks Consensus Estimate of 48 cents. Also, it compared favorably with the year-ago quarter’s earnings of 29 cents.
Results benefited from an improvement in revenues. However, a slightly higher expenses and decline in assets under management (AUM) were the major headwinds. Further, all distribution channels witnessed outflows.
Net income attributable to Waddell & Reed totaled $44.5 million, surging 84.8% from the prior-year quarter.
Revenues & Expenses Rise, AUM Falls
Operating revenues in the quarter rose 3% year over year to $295.3 million, reflecting rise in underwriting and distribution fees. Also, the figure surpassed the Zacks Consensus Estimate of $289.8 million.
Gross sales decreased 11.1% year over year to $2.93 billion. Redemptions rose 5.4% to $6.07 billion. Also, net outflows were $3.13 billion at the end of the reported quarter, up from $2.46 billion at the end of the prior-year quarter.
Operating expenses inched up 0.7% year over year to $237.1 million. The rise was mainly due to higher depreciation cost and subadvisory fees.
Operating margin was 19.7%, up from 17.8% from the year-ago quarter.
As of Jun 30, 2018, AUM totaled $78.65 billion, down 2.2%year over year.
As of Jun 30, 2018, the company’s cash and cash equivalents as well as investment securities totaled $825.2 million. Long-term debt was $94.8 million and stockholders’ equity was $885.7 million.
Performance of Distribution Channels
At the Broker-Dealer channel, gross sales decreased 12.3% year over year to $1 billion. Net outflows totaled $1.05 billion, increasing from $911 million in the year-ago quarter.
At the Unaffiliated Distribution channel, gross sales declined14.5% year over year to $1.78 billion. Also, net outflows were $583 million, increasing from $571 million in the year-ago quarter.
Gross sales at the Institutional channel were $153 million, surging 96.2% from the year-ago quarter. The segment witnessed net outflows of $1.5 billion, up from $973 million witnessed in the prior-year quarter.
Share Repurchases
Waddell & Reed bought back 2.1 billion shares for $40.1 million during the reported quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Waddell & Reed has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value, growth, and momentum investors.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Waddell & Reed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Waddell & Reed (WDR) Up 1% Since Last Earnings Report?
It has been about a month since the last earnings report for Waddell & Reed Financial . Shares have added about 1% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Waddell & Reed Beats on Q2 Earnings & Revenue Estimates
Waddell & Reed’s second-quarter 2018 earnings of 56 cents per share outpaced the Zacks Consensus Estimate of 48 cents. Also, it compared favorably with the year-ago quarter’s earnings of 29 cents.
Results benefited from an improvement in revenues. However, a slightly higher expenses and decline in assets under management (AUM) were the major headwinds. Further, all distribution channels witnessed outflows.
Net income attributable to Waddell & Reed totaled $44.5 million, surging 84.8% from the prior-year quarter.
Revenues & Expenses Rise, AUM Falls
Operating revenues in the quarter rose 3% year over year to $295.3 million, reflecting rise in underwriting and distribution fees. Also, the figure surpassed the Zacks Consensus Estimate of $289.8 million.
Gross sales decreased 11.1% year over year to $2.93 billion. Redemptions rose 5.4% to $6.07 billion. Also, net outflows were $3.13 billion at the end of the reported quarter, up from $2.46 billion at the end of the prior-year quarter.
Operating expenses inched up 0.7% year over year to $237.1 million. The rise was mainly due to higher depreciation cost and subadvisory fees.
Operating margin was 19.7%, up from 17.8% from the year-ago quarter.
As of Jun 30, 2018, AUM totaled $78.65 billion, down 2.2%year over year.
As of Jun 30, 2018, the company’s cash and cash equivalents as well as investment securities totaled $825.2 million. Long-term debt was $94.8 million and stockholders’ equity was $885.7 million.
Performance of Distribution Channels
At the Broker-Dealer channel, gross sales decreased 12.3% year over year to $1 billion. Net outflows totaled $1.05 billion, increasing from $911 million in the year-ago quarter.
At the Unaffiliated Distribution channel, gross sales declined14.5% year over year to $1.78 billion. Also, net outflows were $583 million, increasing from $571 million in the year-ago quarter.
Gross sales at the Institutional channel were $153 million, surging 96.2% from the year-ago quarter. The segment witnessed net outflows of $1.5 billion, up from $973 million witnessed in the prior-year quarter.
Share Repurchases
Waddell & Reed bought back 2.1 billion shares for $40.1 million during the reported quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Waddell & Reed has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value, growth, and momentum investors.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Waddell & Reed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.