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Waddell & Reed (WDR) Stock Up 7.8% Despite Q1 Earnings Miss
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Waddell & Reed Financial Inc.’s first-quarter 2020 earnings per share of 32 cents missed the Zacks Consensus Estimate by a penny. Also, the bottom line declined 24% year over year.
The results reflect a decline in assets under management (AUM) balance owing to substantial outflows. However, a modest increase in revenues and stable operating expenses were tailwinds. The company’s shares increased 7.8% in response to improvement in the top line.
Net income attributable to Waddell & Reed totaled $22 million, down 31% from the prior-year quarter.
Revenues Up, Expenses Stable
Revenues rose 2% year over year to $263.7 million, reflecting a rise in underwriting and distribution fees. Also, the figure beat the Zacks Consensus Estimate of $259.9 million.
Gross sales grew 1% year over year to $2.5 billion. Redemptions were $4.8 billion, up from $4.3 billion in the prior-year quarter.
Operating expenses were relatively stable on a year-over-year basis at $224.3 million.
Adjusted operating margin was 14.9%, up from 13.7% in the year-ago quarter.
As of Mar 31, 2020, AUM totaled $56 billion, down 22% year over year. Net outflows of $2.3 billion were recorded in the quarter.
As of Mar 31, 2020, the company’s cash and cash equivalents, and investment securities totaled $766.1 million. Stockholders’ equity was $765.7 million.
Performance of Distribution Channels
At the Unaffiliated channel, gross sales fell 1% year over year to $1.58 billion. Net outflows were $1.1 billion compared with $437 million recorded in the year-ago quarter.
Gross sales at the Institutional channel were $43 million, down 70% from the year-ago quarter. The segment’s net outflows were $136 million compared with $216 million a year ago.
At the Wealth Management channel, gross sales increased 19% year over year to $895 million. Net outflows totaled $1 billion, up 11% from a year ago.
Share Repurchase Update
Waddell & Reed bought back 3.8 billion shares for $53.9 million during the quarter.
Our Take
The company’s focus on strengthening the Wealth Management channel is expected to support profitability. However, outflows and weak revenue growth are major near-term concerns.
Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise
Invesco (IVZ - Free Report) reported first-quarter 2020 adjusted earnings of 34 cents per share, missing the Zacks Consensus Estimate of 56 cents. Also, the bottom line declined 39.3% from the prior-year quarter.
BlackRock, Inc.’s (BLK - Free Report) first-quarter 2020 adjusted earnings of $6.60 per share lagged the Zacks Consensus Estimate of $6.69. The figure was marginally lower than the year-ago reported number.
Cohen & Steers’ (CNS - Free Report) first-quarter 2020 adjusted earnings of 61 cents per share missed the Zacks Consensus Estimate of 66 cents. However, the bottom line was 5.2% higher than the year-ago reported figure.
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Waddell & Reed (WDR) Stock Up 7.8% Despite Q1 Earnings Miss
Waddell & Reed Financial Inc.’s first-quarter 2020 earnings per share of 32 cents missed the Zacks Consensus Estimate by a penny. Also, the bottom line declined 24% year over year.
The results reflect a decline in assets under management (AUM) balance owing to substantial outflows. However, a modest increase in revenues and stable operating expenses were tailwinds. The company’s shares increased 7.8% in response to improvement in the top line.
Net income attributable to Waddell & Reed totaled $22 million, down 31% from the prior-year quarter.
Revenues Up, Expenses Stable
Revenues rose 2% year over year to $263.7 million, reflecting a rise in underwriting and distribution fees. Also, the figure beat the Zacks Consensus Estimate of $259.9 million.
Gross sales grew 1% year over year to $2.5 billion. Redemptions were $4.8 billion, up from $4.3 billion in the prior-year quarter.
Operating expenses were relatively stable on a year-over-year basis at $224.3 million.
Adjusted operating margin was 14.9%, up from 13.7% in the year-ago quarter.
As of Mar 31, 2020, AUM totaled $56 billion, down 22% year over year. Net outflows of $2.3 billion were recorded in the quarter.
As of Mar 31, 2020, the company’s cash and cash equivalents, and investment securities totaled $766.1 million. Stockholders’ equity was $765.7 million.
Performance of Distribution Channels
At the Unaffiliated channel, gross sales fell 1% year over year to $1.58 billion. Net outflows were $1.1 billion compared with $437 million recorded in the year-ago quarter.
Gross sales at the Institutional channel were $43 million, down 70% from the year-ago quarter. The segment’s net outflows were $136 million compared with $216 million a year ago.
At the Wealth Management channel, gross sales increased 19% year over year to $895 million. Net outflows totaled $1 billion, up 11% from a year ago.
Share Repurchase Update
Waddell & Reed bought back 3.8 billion shares for $53.9 million during the quarter.
Our Take
The company’s focus on strengthening the Wealth Management channel is expected to support profitability. However, outflows and weak revenue growth are major near-term concerns.
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 carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Asset Managers
Invesco (IVZ - Free Report) reported first-quarter 2020 adjusted earnings of 34 cents per share, missing the Zacks Consensus Estimate of 56 cents. Also, the bottom line declined 39.3% from the prior-year quarter.
BlackRock, Inc.’s (BLK - Free Report) first-quarter 2020 adjusted earnings of $6.60 per share lagged the Zacks Consensus Estimate of $6.69. The figure was marginally lower than the year-ago reported number.
Cohen & Steers’ (CNS - Free Report) first-quarter 2020 adjusted earnings of 61 cents per share missed the Zacks Consensus Estimate of 66 cents. However, the bottom line was 5.2% higher than the year-ago reported figure.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>