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Analyst Blog

On Dec 17, 2013, we reaffirmed our long-term recommendation on Franklin Resources Inc. (BEN - Analyst Report) at Neutral. Though the company's fiscal fourth-quarter 2013 earnings lagged the Zacks Consensus Estimate, we expect it to benefit from its consistently increasing assets under management, strategic acquisitions and strong balance sheet.

Why This Stance?

Franklin’s fiscal fourth-quarter 2013 (ended Sep 30)earnings of 80 cents per share lagged the Zacks Consensus Estimate of 86 cents. However, this compared favorably with the year-ago earnings of 77 cents. Results were affected by higher-than-expected expenses.

Franklin enjoys a competitive edge over its peers owing to its diverse and innovative portfolio of investment products as well as strong footprint in Asia and Latin America. Moreover, since its inception in 1981, the company has been consistently increasing its dividend from time to time, which reflects its long-term strategy to enhance shareholder value.

However, Franklin’s asset management business and margins growth are expected to have a negative impact owing to the volatile markets and macroeconomic headwinds.  Additionally, company’s increased costs will pose limit bottom-line growth.

Over the last 60 days, the Zacks Consensus Estimate for 2013 advanced 2.2% to 92 cents per share, while for 2014 it remained almost stable at  $3.73 per share. As a result, Franklin currently carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked investment management firms worth considering include Artisan Partners Asset Management Inc. (APAM - Snapshot Report), Kohlberg Kravis Roberts & Co. L.P. (KKR - Snapshot Report) and Virtus Investment Partners, Inc. (VRTS - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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