Shares of SEI Investments Co. (SEIC) rose 6.1% on Wednesday following its strong second-quarter 2014 earnings. Earnings per share came in at 48 cents beating the Zacks Consensus Estimate of 42 cents. Moreover, the reported figure was up 51.6% from the year-ago quarter. A one-time gain was excluded from the prior-year earnings per share.
Consistent growth in top line emerged as the main reason for the better-than-expected results. However, rising expenses dampened it to some extent. Enhanced asset position and steady capital deployment activities were the other favorable factors.
Net income attributable to common shareholders came in at $82.8 million, down nearly 1% from the prior-year quarter.
Behind the Headlines
Revenues at SEI Investments grew 16% year over year to $318.8 million. The upturn was primarily owing to higher asset management, administration and distribution fees as well as elevated cash flows, partly offset by lower execution fees. Moreover, the figure surpassed the Zacks Consensus Estimate of $314.0 million.
Total expenses totaled $213.6 million, up 4% from the prior-year quarter. The increase resulted from a rise in most of the expense components. However, this was partially offset by a decline in brokerage commissions, stock-based compensation, consulting, outsourcing and professional fees as well as depreciation costs.
Operating income surged 62% year over year to $93.6 million.
As of Jun 30, 2014, assets under management (AUM) rose 22% year over year to $249.1 billion. Total client AUM was recorded at $352.8 billion, up 17% year over year.
Share Repurchases
In the said quarter, SEI Investments bought back 2.2 million shares of its common stock for $71.6 million. As of Jul 22, 2014, the available authorization under the program was roughly $140.5 million.
Our Take
SEI Investments’ robust performance in the quarter was based on impressive growth in all its business segments. Also, the company’s capital deployment activities in the form of share buybacks and dividend hikes make it a striking buy for investors. Moreover, the company’s strong asset inflows will also likely improve its overall growth going forward.
On the other hand, the continuing low interest rate environment, rising expenses and stringent regulations pose challenges.
Currently, SEI Investments has a Zacks Rank #1 (Strong Buy).
Among other investment mangers, Ameriprise Financial, Inc. (AMP) and Invesco Ltd. (IVZ) are scheduled to announce results on Jul 29 and Jul 31, respectively, while Franklin Resources Inc. (BEN) will release third-quarter fiscal 2014 results on Jul 30.
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