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

Waddell & Reed Financial, Inc. (NYSE: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. (NYSE:FII) , Ameriprise Financial, Inc. (NYSE:AMP) and Lazard Ltd (NYSE: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.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

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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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