On Dec 31, 2014, we issued an updated research report on Waddell & Reed Financial, Inc. (WDR). Despite witnessing a consistent improvement in the top line, the company’s financials remain troubled by rising expenses.
Waddell & Reed has been experiencing a sustainable rise in assets under management (AUM), which is expected to boost its long-term profitability. Also, the company continues to invest in its profitable Advisory channel, which will likely be a major driver of its revenues, inflows and AUM in the near future.
Moreover, the company has successfully maintained its quality of investments, and its fund performance ranks among the best in the industry.
Besides, steady capital deployment measures make the stock an attractive pick for yield-seeking investors.
However, escalating expenses continue to be a major dampener for Waddell & Reed. To add to the woes, costs are anticipated to mount further in the upcoming quarters, putting pressure on margin.
At the same time, the company’s balance sheet remains a concern, given the high composition of intangible assets.
Also, a downtrend in the investment management business and restrictions imposed on the company by the revolving credit-facility can further hamper Waddell & Reed’s future growth.
Analysts hold neutral views about the company’s future prospects. Consequently, over the last 30 days, the Zacks Consensus Estimate for 2014 and 2015 have remained stable at $3.67 and $3.70 per share, respectively.
Waddell & Reed currently carries a Zacks Rank #3 (Hold).
Stocks Worth a Look
Some better-ranked stocks in the same industry include Affiliated Managers Group Inc. (AMG), Northstar Asset Management Group Inc. (NSAM) and Monroe Capital Corporation (MRCC), each sporting a Zacks Rank #1 (Strong Buy).
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