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Lower Costs Aid Waddell & Reed's (WDR) Profits: Time to Buy?

Zacks Equity Research

Waddell & Reed Financial, Inc. WDR is well poised for improvement in profits, considering its continuously declining expenses. Moreover, the company’s capital deployment activities reflect a solid capital and balance sheet position.

The company’s price performance also seems impressive. Its shares have gained 18.6% in the past six months, outperforming the 15.1% rally of its industry.

Also, the Zacks Consensus Estimate for the current-year earnings has been revised 4.8% upward in the last 60 days, reflecting analysts’ optimism regarding its earnings growth potential. Thus, the stock currently flaunts a Zacks Rank #1 (Strong Buy).



However, pressure on revenues and a declining trend in assets under management (AUM) are the major near-term concerns for the company.

Looking at the fundamentals, Waddell & Reed’s expenses have fallen at a CAGR of 5.1% over the last three years (2014-2016). As the company is trying to boost efficiency and optimize operations, expenses are likely to continue declining, driving the bottom line.

Also, the company’s persistent investment in Retail Broker-Dealer channel should help in boosting revenues and inflows.

Further, with a stable capital position and impressive earnings strength, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.

However, the company’s revenues have been witnessing a decline since the past few years due to a tough operating environment and lower sales volume. While the company is taking initiates through Project E to drive the top line, it will take some time to witness a rebound in the same.

A few other top-ranked stocks from the same space are Federated Investors, Inc. FII, Ameriprise Financial, Inc. AMP and Lazard Ltd LAZ.

Earnings estimates for Federated Investors have been revised 3.4% upward for 2017 over the past 60 days. Its share price has risen 30.5% over the last six months. The stock currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ameriprise Financial’s earnings estimates have been revised upward by 6% for the current year in the past 60 days. In the last six months, the company’s shares have returned 30.1%. It carries a Zacks Rank #2 (Buy).

Lazard has witnessed an upward earnings estimate revision of 3.8% for the current year in the past 60 days. Also, its shares have gained 13.3% over the last six months. It also carries a Zacks Rank of 2.

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Waddell & Reed Financial, Inc. (WDR) : Free Stock Analysis Report
 
AMERIPRISE FINANCIAL SERVICES, INC. (AMP) : Free Stock Analysis Report
 
Federated Investors, Inc. (FII) : Free Stock Analysis Report
 
Lazard Ltd. (LAZ) : Free Stock Analysis Report
 
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