Citi Has Buy Rating On Waddell & Reed Financial (WDR)

Citi Investment Research has a Buy rating and a $48 price target on shares of Waddell & Reed Financial WDR. In a note to investors, Citi writes, "In response to market skepticism around profit margin lift (in light of still booming volumes), we update our "decomposition" work we did in mid-February following then CIRA-sponsored investor meetings with investors (see also our 2/18 note, Constructive Updates – Raise Ests/Target; Top U.S. Retail Play). Here, we bifurcate (and isolate) distribution impact from manufacturing and further parse distribution margin drivers by channel between advisors and wholesale segments. In turn, we are encouraged by two key observations: 1) segment operating margin was stable Q/Q despite 30% jump in wholesale gross sales and 14% sequential rise in advisor gross sales (both pressuring upfront costs), and despite two fewer revenue days and only partial benefit from robust markets; and, 2) wholesale business is now scaled that incremental revenue dollars are large enough to help drive overall profits." Shares of WDR gained 57 cents yesterday to close at $40.21, a gain of 1.44%.