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Waddell & Reed (WDR) Beats on Q2 Earnings as Expenses Fall
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Waddell & Reed Financial Inc.’s second-quarter 2019 adjusted earnings of 42 cents per share outpaced the Zacks Consensus Estimate of 37 cents. However, the bottom line decreased 24% year over year.
Results benefited from decline in expenses. However, fall in assets under management (AUM) and lower revenues were major headwinds. Further, all distribution channels witnessed outflows.
Net income attributable to Waddell & Reed totaled $33.9 million, down 24% from the prior-year quarter.
Revenues, Expenses & AUM Down
Operating revenues declined 9% year over year to $270.2 million, reflecting lower investment management fees, underwriting and distribution fees, and shareholder service fees. However, the figure beat the Zacks Consensus Estimate of $265.7 million.
Gross sales decreased 27% year over year to$2.13 billion. Redemptions fell 26% to $4.49 billion. Net outflows were $2.36 billion, down 25%.
Operating expenses declined 3% year over year to $228.9 million. Almost all expense components, except for distribution costs and subadvisory fees, witnessed a fall.
Operating margin was 15.3%, down from 19.7%.
As of Jun 30, 2019, AUM totaled $71.9 billion, down 9% year over year.
As of Jun 30, 2019, the company’s cash and cash equivalents, and investment securities totaled $866.8 million. Long-term debt was $94.9 million and stockholders’ equity was $868.6 million.
Performance of Distribution Channels
At the Unaffiliated channel, gross sales fell 27% year over year to $1.29 billion. Net outflows were $847 million, up 45%.
Gross sales at the Institutional channel were $54 million, plunging 65% from the year-ago quarter. The segment witnessed net outflows of $361 million, down 76%.
At the Wealth Management channel, gross sales decreased 21% year over year to $789 million. Net outflows totaled $1.15 billion, up 9%.
Share Repurchases
Waddell & Reed bought back 2.10 billion shares for $40.1 million during the reported quarter.
Our Take
Decrease in AUM is likely to hamper Waddell & Reed’s financials in the near term. Nevertheless, as the company is making efforts to improve efficiency and optimize operations, expenses are likely to trend lower in the next few quarters.
Waddell & Reed Financial, Inc. Price, Consensus and EPS Surprise
Blackstone (BX - Free Report) reported second-quarter distributable earnings of 57 cents, beating the Zacks Consensus Estimate of 50 cents. Moreover, the figure reflected improvement from 56 cents earned in the prior-year quarter.
BlackRock, Inc.’s (BLK - Free Report) second-quarter adjusted earnings of $6.41 per share lagged the Zacks Consensus Estimate of $6.52. Moreover, the figure was 3.8% lower than the year-ago quarter’s number.
Invesco (IVZ - Free Report) reported second-quarter 2019 adjusted earnings of 65 cents per share, beating the Zacks Consensus Estimate of 57 cents. However, the bottom line was 1.5% below the prior-year quarter figure.
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Waddell & Reed (WDR) Beats on Q2 Earnings as Expenses Fall
Waddell & Reed Financial Inc.’s second-quarter 2019 adjusted earnings of 42 cents per share outpaced the Zacks Consensus Estimate of 37 cents. However, the bottom line decreased 24% year over year.
Results benefited from decline in expenses. However, fall in assets under management (AUM) and lower revenues were major headwinds. Further, all distribution channels witnessed outflows.
Net income attributable to Waddell & Reed totaled $33.9 million, down 24% from the prior-year quarter.
Revenues, Expenses & AUM Down
Operating revenues declined 9% year over year to $270.2 million, reflecting lower investment management fees, underwriting and distribution fees, and shareholder service fees. However, the figure beat the Zacks Consensus Estimate of $265.7 million.
Gross sales decreased 27% year over year to$2.13 billion. Redemptions fell 26% to $4.49 billion. Net outflows were $2.36 billion, down 25%.
Operating expenses declined 3% year over year to $228.9 million. Almost all expense components, except for distribution costs and subadvisory fees, witnessed a fall.
Operating margin was 15.3%, down from 19.7%.
As of Jun 30, 2019, AUM totaled $71.9 billion, down 9% year over year.
As of Jun 30, 2019, the company’s cash and cash equivalents, and investment securities totaled $866.8 million. Long-term debt was $94.9 million and stockholders’ equity was $868.6 million.
Performance of Distribution Channels
At the Unaffiliated channel, gross sales fell 27% year over year to $1.29 billion. Net outflows were $847 million, up 45%.
Gross sales at the Institutional channel were $54 million, plunging 65% from the year-ago quarter. The segment witnessed net outflows of $361 million, down 76%.
At the Wealth Management channel, gross sales decreased 21% year over year to $789 million. Net outflows totaled $1.15 billion, up 9%.
Share Repurchases
Waddell & Reed bought back 2.10 billion shares for $40.1 million during the reported quarter.
Our Take
Decrease in AUM is likely to hamper Waddell & Reed’s financials in the near term. Nevertheless, as the company is making efforts to improve efficiency and optimize operations, expenses are likely to trend lower in the next few quarters.
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
Blackstone (BX - Free Report) reported second-quarter distributable earnings of 57 cents, beating the Zacks Consensus Estimate of 50 cents. Moreover, the figure reflected improvement from 56 cents earned in the prior-year quarter.
BlackRock, Inc.’s (BLK - Free Report) second-quarter adjusted earnings of $6.41 per share lagged the Zacks Consensus Estimate of $6.52. Moreover, the figure was 3.8% lower than the year-ago quarter’s number.
Invesco (IVZ - Free Report) reported second-quarter 2019 adjusted earnings of 65 cents per share, beating the Zacks Consensus Estimate of 57 cents. However, the bottom line was 1.5% below the prior-year quarter figure.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>