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Waddell & Reed (WDR) Q4 Earnings Miss on Higher Expenses
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Waddell & Reed Financial Inc.’s fourth-quarter 2020 adjusted earnings of 41 cents per share lagged the Zacks Consensus Estimate of 46 cents. However, the bottom line was above 23 cents reported in the prior-year quarter.
Results reflect improvement in revenues and a solid rise in assets under management (AUM) balance despite modest outflows during the quarter. However, a rise in operating expenses was a headwind.
Results included costs pertaining to the proposed acquisition of the company by Macquarie Asset Management, which was announced in December 2020. After considering this, net loss was $6.9 million against net income of $16.1 billion in the prior-year period.
In 2020, adjusted earnings per share of $1.58 missed the consensus estimate of $1.63 and declined 15.5% year over year. Net income (GAAP basis) was $72.7 million, down 37.8%.
Revenues, AUM & Expenses Up
Revenues in the reported quarter grew 3% year over year to $278.1 million. A rise in all revenue components, except shareholder service fees, primarily drove the top-line growth. However, the figure marginally missed the Zacks Consensus Estimate of $278.2 million.
In 2020, revenues were $1.05 billion, down 1.9% year over year. The top line matched the consensus estimate.
Gross sales rose 28.4% to $2 billion. Redemptions were $3.8 billion, down from $4.9 billion in the prior-year quarter.
Operating expenses jumped 23.4% on a year-over-year basis to $283.9 million. Adjusted operating expenses increased 2.4% to $244.3 million.
Adjusted operating margin was 12.1%, down from 16.3%.
As of Dec 31, 2020, AUM totaled $74.8 billion, up 7%. Net outflows of $1.8 billion were recorded in the quarter. Further, assets under administration were $69.7 billion, rising 16%.
As of Dec 31, 2020, the company’s cash and cash equivalents, and investment securities totaled $760.5 million. Stockholders’ equity was $727.8 million.
Solid Quarterly Performance of Distribution Channels
At the Unaffiliated channel, gross sales surged 46.8% year over year to $1.3 billion. Net outflows were $462 million compared with $1.4 billion in the year-ago quarter.
Gross sales at the Institutional channel were $46 million, jumping 43.8%. The channel’s net outflows were $143 million compared with $842 million a year ago.
At the Wealth Management channel, gross sales increased 3.9% year over year to $688 million. Net outflows totaled $1.2 billion, up 1%.
Share Repurchase Update
Waddell & Reed bought back 102.8 million shares for $2.6 million during the quarter.
Our Viewpoint
Waddell & Reed’s focus on strengthening the Wealth Management channel is expected to support profitability over the long term. However, continued outflows are a major near-term concern.
Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise
Cohen & Steers’ (CNS - Free Report) fourth-quarter 2020 adjusted earnings of 76 cents per share surpassed the Zacks Consensus Estimate of 67 cents. Moreover, the bottom line was 2.7% higher than the year-ago reported figure.
Invesco (IVZ - Free Report) reported fourth-quarter 2020 adjusted earnings of 72 cents per share, surpassing the Zacks Consensus Estimate of 57 cents. Also, the bottom line grew 12.5% from the prior-year quarter.
SEI Investments Co.’s (SEIC - Free Report) fourth-quarter 2020 earnings of 86 cents per share surpassed the Zacks Consensus Estimate of 80 cents. Moreover, the figure reflects a rise of 2.4% from the prior-year quarter.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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Waddell & Reed (WDR) Q4 Earnings Miss on Higher Expenses
Waddell & Reed Financial Inc.’s fourth-quarter 2020 adjusted earnings of 41 cents per share lagged the Zacks Consensus Estimate of 46 cents. However, the bottom line was above 23 cents reported in the prior-year quarter.
Results reflect improvement in revenues and a solid rise in assets under management (AUM) balance despite modest outflows during the quarter. However, a rise in operating expenses was a headwind.
Results included costs pertaining to the proposed acquisition of the company by Macquarie Asset Management, which was announced in December 2020. After considering this, net loss was $6.9 million against net income of $16.1 billion in the prior-year period.
In 2020, adjusted earnings per share of $1.58 missed the consensus estimate of $1.63 and declined 15.5% year over year. Net income (GAAP basis) was $72.7 million, down 37.8%.
Revenues, AUM & Expenses Up
Revenues in the reported quarter grew 3% year over year to $278.1 million. A rise in all revenue components, except shareholder service fees, primarily drove the top-line growth. However, the figure marginally missed the Zacks Consensus Estimate of $278.2 million.
In 2020, revenues were $1.05 billion, down 1.9% year over year. The top line matched the consensus estimate.
Gross sales rose 28.4% to $2 billion. Redemptions were $3.8 billion, down from $4.9 billion in the prior-year quarter.
Operating expenses jumped 23.4% on a year-over-year basis to $283.9 million. Adjusted operating expenses increased 2.4% to $244.3 million.
Adjusted operating margin was 12.1%, down from 16.3%.
As of Dec 31, 2020, AUM totaled $74.8 billion, up 7%. Net outflows of $1.8 billion were recorded in the quarter. Further, assets under administration were $69.7 billion, rising 16%.
As of Dec 31, 2020, the company’s cash and cash equivalents, and investment securities totaled $760.5 million. Stockholders’ equity was $727.8 million.
Solid Quarterly Performance of Distribution Channels
At the Unaffiliated channel, gross sales surged 46.8% year over year to $1.3 billion. Net outflows were $462 million compared with $1.4 billion in the year-ago quarter.
Gross sales at the Institutional channel were $46 million, jumping 43.8%. The channel’s net outflows were $143 million compared with $842 million a year ago.
At the Wealth Management channel, gross sales increased 3.9% year over year to $688 million. Net outflows totaled $1.2 billion, up 1%.
Share Repurchase Update
Waddell & Reed bought back 102.8 million shares for $2.6 million during the quarter.
Our Viewpoint
Waddell & Reed’s focus on strengthening the Wealth Management channel is expected to support profitability over the long term. However, continued outflows are a major near-term concern.
Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise
Waddell & Reed Financial, Inc. price-consensus-eps-surprise-chart | Waddell & Reed Financial, Inc. Quote
Waddell & Reed currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Asset Managers
Cohen & Steers’ (CNS - Free Report) fourth-quarter 2020 adjusted earnings of 76 cents per share surpassed the Zacks Consensus Estimate of 67 cents. Moreover, the bottom line was 2.7% higher than the year-ago reported figure.
Invesco (IVZ - Free Report) reported fourth-quarter 2020 adjusted earnings of 72 cents per share, surpassing the Zacks Consensus Estimate of 57 cents. Also, the bottom line grew 12.5% from the prior-year quarter.
SEI Investments Co.’s (SEIC - Free Report) fourth-quarter 2020 earnings of 86 cents per share surpassed the Zacks Consensus Estimate of 80 cents. Moreover, the figure reflects a rise of 2.4% from the prior-year quarter.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>