SEI Investments Beats Q4 Earnings on AUM Growth

Better-than-expected revenues stemming from a rise in assets under management (AUM) drove SEI Investments Co.’s (SEIC – Analyst Report) fourth-quarter 2013 earnings per share of 37 cents, which beat the Zacks Consensus Estimate by a penny. Further, it rose 16% from 32 cents earned in the year-ago quarter.

For the full year 2013, SEI Investments recorded earnings per share of $1.64 versus $1.18 in 2012. Excluding one-time gains related to the sale of SEI Asset Korea and litigation settlement payment in first and second quarter 2013, respectively, full-year 2013 earnings per share of $1.39 was in line with the Zacks Consensus Estimate.

Results benefited from top-line growth, partially offset by higher expenses. Consistent improvement in asset position and steady capital deployment activities were the other tailwinds for the quarter.

Net income attributable to common shareholders was $65.5 million, up 16% year over year. However, for the full year, net income came in at $288.1 million, increasing 39% from $206.8 million in 2012.

Behind the Headlines

Revenues at SEI Investments grew 14% year over year to $299.0 million in the reported quarter. The improvement was mainly attributable to a rise in asset management, administration, distribution as well as Information processing and software servicing fees. Further, it beat the Zacks Consensus Estimate of $290.0 million.

For 2013, total revenue came in at $1.13 billion, up 13% from $992.5 million in 2012. Moreover, total revenue surpassed the Zacks Consensus Estimate of $1.12 billion.

Total expenses were $230.6 million, up 12% from the prior-year quarter. The increase was owing to a rise in all the components except for a decline of nearly 1% in brokerage commissions and 6% in depreciation costs.

Operating income increased 21.8% from the year-ago quarter to $68.5 million.

As of Dec 31, 2013, AUM rose 15% year over year to $231.9 billion. Total client AUM was recorded at $327.3 billion, up 27% from $256.8 billion as of Dec 31, 2012.

Share Repurchases

In the said quarter, SEI Investments repurchased 1.9 million shares of its common stock for $64.7 million.

Our Viewpoint

SEI Investment will continue to benefit from the growing demand for risk management and alternative investment solutions in the financial service industry. The company’s capital deployment activities in the form of share buybacks and dividend hikes make it an attractive pick for investors. Further, strong asset inflows will likely boost its overall growth going forward.

However, we remain apprehensive about the persistent low interest-rate environment, and stringent regulations.

Currently, SEI Investments carries a Zacks Rank #2 (Buy).

Among other investment mangers, Artisan Partners Asset Management Inc. (APAM – Snapshot Report) is scheduled to report its results on Feb 3, while Waddell & Reed Financial, Inc. (WDR – Analyst Report) and Affiliated Managers Group Inc. (AMG – Analyst Report) will do so on Feb 4.