Will This Analyst Downgrade Hurt Waddell & Reed (WDR) Stock Today?

NEW YORK (TheStreet) -- Citigroup downgraded Waddell & Reed  (WDR) to "neutral" from "buy," set a $66 price target and reduced its estimates due to lower expected organic growth.

The stock closed at $60.84 on Wednesday.

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Separately, TheStreet Ratings team rates WADDELL&REED FINL INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WADDELL&REED FINL INC (WDR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and impressive record of earnings per share growth. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 22.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Capital Markets industry and the overall market, WADDELL&REED FINL INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 37.88% is the gross profit margin for WADDELL&REED FINL INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.98% is above that of the industry average.
  • Net operating cash flow has increased to $88.94 million or 45.47% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.21%.
  • WADDELL&REED FINL INC has improved earnings per share by 39.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WADDELL&REED FINL INC increased its bottom line by earning $2.96 versus $2.25 in the prior year. This year, the market expects an improvement in earnings ($3.76 versus $2.96).
  • You can view the full analysis from the report here: WDR Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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