SEI Investments (SEIC) Tanks Over 10% On Q2 Earnings Miss

Shares of SEI Investments Co. (NASDAQ:SEIC) declined 10.5% following the release of its second-quarter 2016 results before the market opened yesterday. Earnings of 49 cents lagged the Zacks Consensus Estimate by a penny. Further, the bottom line declined 3.9% from 51 cents in the year-ago quarter.

Higher expenses, which were partially offset by an increase in revenues, were primarily responsible for this earnings miss. Nonetheless, the company's asset position reflected consistent improvement.

Net income was $81 million, down 6% from the year-ago quarter.

Revenues, Expenses and AUM Depict an Uptrend

Revenues at SEI Investments grew 2% year over year to $343.8 million. The improvement was mainly driven by an increase in asset management, administration and distribution fees as well as elevated cash flows, partially offset by increased market volatility. However, the figure lagged the Zacks Consensus Estimate of $347 million.

Total expenses amounted to $250.3 million, up 3.5% year over year. Components other than sub-advisory, distribution & other asset management costs, software royalties & other information processing costs and brokerage commissions recorded a rise.

Operating income declined 2.5% year over year to $93.5 million.

As of Jun 30, 2016, assets under management (AUM) rose 2.8% year over year to $269.3 billion. Total client AUM was recorded at $437.7 billion, up 9.6% year over year.

Share Repurchase

In the reported quarter, SEI Investments bought back 1.5 million shares of its common stock for $73.5 million.

Our Take

SEI Investments, backed by its global investment products and services, will be able to continue generating revenues in the coming quarters. Moreover, robust asset inflows are expected to be accretive to the company’s overall growth.

The company’s capital deployment activities remain impressive, but its high dependence on fee-based revenues and weak expense management, along with a stringent regulatory landscape will likely weigh on its profitability in the quarters ahead.

Currently, SEI Investments has a Zacks Rank #3 (Hold).

Performance of Other Investment Managers

Waddell & Reed Financial Inc. (NYSE:WDR) reported second-quarter 2016 adjusted earnings of 59 cents per share, surpassing the Zacks Consensus Estimate of 48 cents. Better-than-expected results were primarily driven by lower expenses. However, a decline in revenues, elevated outflows and deteriorating assets under management were the undermining factors.

The Blackstone Group L.P. (NYSE:BX) reported second-quarter 2016 economic net income of 44 cents per share, which surpassed the Zacks Consensus Estimate of 40 cents. Better-than-expected results were attributable to a significant decline in expenses and higher total investment income, partially offset by lower performance fees. Also, growth in assets under management continued to be impressive.

Ameriprise Financial Inc. (NYSE:AMP) reported second-quarter 2016 operating earnings per share of $2.23, missing the Zacks Consensus Estimate of $2.27. The results came in lower than expected primarily due to a drop in revenues. However, a decline in operating expenses and increase in assets under management and assets under administration were on the positive side.