Waddell & Reed Shares Fall On Downgrade

DES MOINES, Iowa (AP) — Shares of investment manager Waddell & Reed Financial Inc. fell Wednesday after the company's strong recent stock performance led to a downgrade based on valuation.

Waddell & Reed shares fell 93 cents to $17.55 in afternoon trading.

Analysts at Credit Suisse downgraded the company to "Neutral" from "Outperform" but raised first-quarter profit estimates to 20 cents from 18 cents and fiscal 2009 estimates to 90 cents from 85 cents. The adjustment reflects positive returns in the company's funds, analyst Craig Siegenthaler said.

The Overland Park, Kan., company remains on track to reach its 20 percent operating margin objective by the fourth quarter and will likely try to manage expenses to conserve profitability for shareholders, he said.

"We believe that many asset managers may essentially 'turn back the clocks' on their business models — by consolidating like products that may be unprofitable on a stand-alone basis," he wrote. "Cost cutting over the past few quarters will allow for more operating leverage in an equity market recovery, by lowering the fixed cost base."