SEI Meets EPS, Revenues Rise

SEI Investments Co.’s ( SEIC - Analyst Report ) fourth quarter 2012 earnings came in at 32 cents per share, in line with the Zacks Consensus Estimate. Moreover, it surged 28% from the year-ago quarter’s earnings of 25 cents.

On a year over-year-basis, the quarterly results were aided by a growth in top line, partially offset by higher expenses. Additionally, continued improvement in asset position and steady capital deployment activity were the other positives.

Net income attributable to common shareholders reached $56.6 million for the fourth quarter, rising 27% from $44.4 million in the prior-year quarter. For 2012, it stood at $206.8 million, increasing 1% year over year.

For 2012, earnings per share came in at $1.18, at par with the Zack Consensus Estimate and 6% above $1.11 in 2011.

Behind the Headlines

SEI’s revenues grew 16% year over year to $261.6 million in the reported quarter. This was also ahead of the Zacks Consensus Estimate of $257.0 million. The improvement was mainly attributable to an increase in asset management, administration and distribution fee revenues.

For 2012, revenues were $992.5 million, climbing 7% from $929.7 million in 2011. Yet, this was below the Zacks Consensus Estimate of $988.0 million.

Total expenses stood at $205.4 million, up 13% year over year. The rise was primarily due to higher sub-advisory, distribution and other asset management costs as well as increase in compensation, benefits and other personnel costs.

Interest expense came in at $0.1 million, almost at par with the prior-year quarter level. Operating income stood at $56.2, jumping 27% from the year-ago quarter.

Asset Position

As of Dec 31, 2012, assets under management fell 15% year over year and 9% sequentially to $172.0 billion. Total asset under administration as of Dec 31, 2012 was recorded at $403.6 billion, down 12% from $458.4 billion as of Dec 31, 2011 and 6% from $427.9 billion as of Sep 30, 2012.

Capital Deployment Activities

In the reported quarter, SEI purchased 1.9 million shares of its common stock for $41.7 million. Additionally, in Dec 2012, SEI approved an increase in its stock repurchase program by $50 million, which also hiked the available authorization under the program to about $100 million.

Further, the company declared a one-time, special cash dividend of 32 cents per share. This dividend was paid on Dec 28, 2012 to shareholders of record on Dec 21, 2012.

Our Viewpoint

Investment appreciation in SEI, along with the growing need for risk management and alternative investment solutions within the financial service industry, is expected to contribute positively over the long run. Moreover, the company’s sound capital deployment policy will reinforce investors’ confidence. However, persistent sluggish economic recovery will continue to keep the company’s financials under pressure in the near term.

Other investment management companies that are yet to report the quarterly results include Franklin Resources Inc. ( BEN - Analyst Report ) , Lazard Ltd ( LAZ - Analyst Report ) and Legg Mason Inc. ( LM - Analyst Report ) . Franklin will report its fiscal first quarter 2013 results and Legg Mason will announce its fiscal third quarter 2013 on Feb 1, 2013, while Lazard will declare its fourth quarter and full-year 2012 results on Feb 7, 2013.

Currently, SEI retains a Zacks Rank #3 (Hold).