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SEI Investments Beats on Q3 Earnings

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SEI Investments Co.’s (SEIC - Free Report) third-quarter 2013 earnings per share came in at 38 cents, beating the Zacks Consensus Estimate of 34 cents. Further, it rose 31% from the year-ago earnings of 29 cents.

Better-than-expected results benefited from top-line growth, partially offset by higher expenses. Consistent improvement in asset position and steady capital deployment activities were the other highlights.

Net income attributable to common shareholders was $67.2 million, up 32% year over year.

Behind the Headlines

Revenues at SEI Investments grew 11% year over year to $280.7 million in the reported quarter. The improvement was mainly attributable to a rise in asset management, administration and distribution fees. However, it lagged the Zacks Consensus Estimate of $286.0 million.

Total expenses were $218.7 million, up 10% from the prior-year quarter. The increase was mainly due to rise in sub advisory, distribution and other asset management costs, compensation, benefits and other personnel costs as well as stock-based compensation expenses. These were partially offset by a fall in facilities, supplies and other costs as well as amortization and depreciation.

Moreover, interest expense came in at $0.2 million, up 70% year over year.

Operating income increased 16% from the year-ago quarter to $58 million.

As of Sep 30, 2013, assets under management rose 12% year over year to $218.5 billion. Total client assets under administration on that date were recorded at $310.1 billion, up 23% from $252.6 billion as of Sep 30, 2012.

Share Repurchases

In the said quarter, SEI Investments repurchased 1.9 million shares of its common stock for $58.6 million.

Performance of Other Asset Managers

Lazard Ltd.’s (LAZ - Free Report) third-quarter 2013 adjusted earnings easily beat the Zacks Consensus Estimate. Better-than-expected results were driven by strong top-line performance, partly offset by higher expenses.

However, The Blackstone Group L.P.’s (BX - Free Report) third-quarter 2013 economic net income marginally missed the Zacks Consensus Estimate. Lower-than-expected results were due to a fall in top line, partially offset by lower expenses.

Among other asset managers, Waddell & Reed Financial, Inc. (WDR - Free Report) is scheduled to report results on Oct 29. The company currently has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +1.39%. Hence, it has the right combination to post an earnings beat this quarter.  

Our Viewpoint

The growing demand for risk management and alternative investment solutions in the financial service industry are expected to benefit SEI Investments’ financials in the future. Moreover, the company’s capital deployment activities are impressive. Further, SEI Investments’ strong asset inflows will likely boost its overall growth, going forward.

However, we remain apprehensive about the persistent low interest-rate environment, and stringent regulations.

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

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