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Why Is Franklin Resources (BEN) Up 3.9% Since Last Earnings Report?
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It has been about a month since the last earnings report for Franklin Resources (BEN - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Franklin Resources due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Franklin's Q2 Earnings Beat Estimates on Higher AUM
Franklin reported second-quarter fiscal 2021 (ended Mar 31) adjusted earnings of 79 cents per share, which topped the Zacks Consensus Estimate of 74 cents. The bottom line also compared favorably with the earnings of 66 cents per share recorded in the prior-year quarter.
The company’s results display top-line strength during the quarter. Also, a solid capital position and higher AUM were positives. However, higher expenses were a major drag. Additionally, net outflows were an undermining factor.
Adjusted operating income came in at $581.1 million in the reported quarter compared with the prior-year quarter’s $385.9 million.
Including certain notable items, net income was $381.8 million or 74 cents per share compared with $79.1 million or 16 cents per share recorded in the prior-year quarter.
Higher Revenues Partly Offset by Elevated Costs
Total operating revenues jumped 85% year over year to $2.08 billion in the fiscal second quarter on higher investment management, sales and distribution, other and shareholder-servicing fees.
Investment management fees surged 76% year over year to $1.6 billion, while other revenues increased 35% to $8.8 million. Moreover, sales and distribution fees were up 21% to $413.6 million. Also, shareholder-servicing fees climbed 2% on a year-over-year basis to $55.7 million.
Total operating expenses flared up 67% year over year to $1.62 billion. This upsurge resulted from rise in all components of expenses, including compensation and benefits, information systems and technology, general, administrative and other along with sales, distribution and marketing expenses.
The company reported operating margin of 22% compared with 25.9% in the year-ago quarter.
Higher AUM
As of Mar 31, 2021, total AUM came in at $1.5 trillion, up slightly from previous month and up 158% from $580.3 billion as of Mar 31, 2020. Notably, the company recorded net new outflows of $4.2 billion during the January-March period.
Simple monthly average AUM of $1.49 trillion increased 4% sequentially and 128% on a year-over-year basis.
Stable Capital Position
As of Mar 31, 2021, cash and cash equivalents, along with investments, were $5.2 billion compared with $4.3 billion as of Sep 30, 2020. Furthermore, total stockholders' equity was $11.7 billion compared with $11 billion as of Sep 30, 2020.
During the reported quarter, the company repurchased 1.7 million shares for a total cost of $45.8 million.
Outlook
Post addition of two months of Legg Mason, the company remains on track to realize $300 million of gross synergies with 85% of run rate savings expected to be realized by the end of fiscal year 2021.
The cost to achieve these savings is expected to be approximately $200 million, which is a $150 million less than originally anticipated. Also, around $600 million of cash tax benefit related to the various tax attributes and deductions is expected, which carried forward in the transaction a 20% increase from initial estimate.
Effective tax rate for fiscal 2021 is expected to be between 24-26%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 7.55% due to these changes.
VGM Scores
Currently, Franklin Resources has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Franklin Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Franklin Resources (BEN) Up 3.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Franklin Resources (BEN - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Franklin Resources due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Franklin's Q2 Earnings Beat Estimates on Higher AUM
Franklin reported second-quarter fiscal 2021 (ended Mar 31) adjusted earnings of 79 cents per share, which topped the Zacks Consensus Estimate of 74 cents. The bottom line also compared favorably with the earnings of 66 cents per share recorded in the prior-year quarter.
The company’s results display top-line strength during the quarter. Also, a solid capital position and higher AUM were positives. However, higher expenses were a major drag. Additionally, net outflows were an undermining factor.
Adjusted operating income came in at $581.1 million in the reported quarter compared with the prior-year quarter’s $385.9 million.
Including certain notable items, net income was $381.8 million or 74 cents per share compared with $79.1 million or 16 cents per share recorded in the prior-year quarter.
Higher Revenues Partly Offset by Elevated Costs
Total operating revenues jumped 85% year over year to $2.08 billion in the fiscal second quarter on higher investment management, sales and distribution, other and shareholder-servicing fees.
Investment management fees surged 76% year over year to $1.6 billion, while other revenues increased 35% to $8.8 million. Moreover, sales and distribution fees were up 21% to $413.6 million. Also, shareholder-servicing fees climbed 2% on a year-over-year basis to $55.7 million.
Total operating expenses flared up 67% year over year to $1.62 billion. This upsurge resulted from rise in all components of expenses, including compensation and benefits, information systems and technology, general, administrative and other along with sales, distribution and marketing expenses.
The company reported operating margin of 22% compared with 25.9% in the year-ago quarter.
Higher AUM
As of Mar 31, 2021, total AUM came in at $1.5 trillion, up slightly from previous month and up 158% from $580.3 billion as of Mar 31, 2020. Notably, the company recorded net new outflows of $4.2 billion during the January-March period.
Simple monthly average AUM of $1.49 trillion increased 4% sequentially and 128% on a year-over-year basis.
Stable Capital Position
As of Mar 31, 2021, cash and cash equivalents, along with investments, were $5.2 billion compared with $4.3 billion as of Sep 30, 2020. Furthermore, total stockholders' equity was $11.7 billion compared with $11 billion as of Sep 30, 2020.
During the reported quarter, the company repurchased 1.7 million shares for a total cost of $45.8 million.
Outlook
Post addition of two months of Legg Mason, the company remains on track to realize $300 million of gross synergies with 85% of run rate savings expected to be realized by the end of fiscal year 2021.
The cost to achieve these savings is expected to be approximately $200 million, which is a $150 million less than originally anticipated. Also, around $600 million of cash tax benefit related to the various tax attributes and deductions is expected, which carried forward in the transaction a 20% increase from initial estimate.
Effective tax rate for fiscal 2021 is expected to be between 24-26%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 7.55% due to these changes.
VGM Scores
Currently, Franklin Resources has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Franklin Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.