Shares of Waddell & Reed Financial, Inc. (WDR) hit a new 52-week high, touching $65.18 at the end of the trading session on Nov 13. However, the stock closed the session at $65.16, which reflects a solid year-to-date return of 85.1%.The trading volume for the session was 0.5 million shares.
Despite the strong price appreciation, this Zacks Rank #1 (Strong Buy) stock has plenty of upside left, given its strong estimate revisions over the last 30 days and expected long-term earnings growth of 18.10%.
Growth Drivers
Impressive third-quarter 2013 results comprising a positive earnings surprise of 11.11% and growth in revenues, together with a strong balance sheet were the key driving factors for Waddell & Reed.
On Oct 29, Waddell & Reed reported third-quarter 2013 earnings of 80 cents per share, outpacing the Zacks Consensus Estimate of 72 cents. Further, earnings surpassed the prior-year quarter figure of 61 cents.
A year-over-year increase of 18.2% in revenues, 24.8% in gross sales and 78.6% in net inflows were the tailwinds for the quarter. The company’s strong balance sheet was another positive. However, 14.2% year-over-year rise in expenses, due to higher underwriting and distribution expenses, compensation and related costs as well as general and administrative costs, was the headwind.
Further, Waddell & Reed has delivered positive earnings surprises in the past 4 quarters with an average beat of 5.65%.
Estimate Revisions Show Potency
Over the last 30 days, 5 out of 6 estimates for 2013 have been revised upward, lifting the Zacks Consensus Estimate by 1.8% to $2.77 per share. For 2014, 7 out of 8 estimates moved north, helping the Zacks Consensus Estimate advance 5.9% to $3.42 per share.
Other better performing investment management firms include Brookfield Asset Management Inc. (BAM), GAMCO Investors, Inc. (GBL) and Artisan Partners Asset Management Inc. (APAM). All these stocks carry the same Zacks Rank as Waddell & Reed.
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