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Franklin (BEN) to Report Q4 Earnings: What's in the Cards?
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Franklin Resources Inc. (BEN - Free Report) is scheduled to report its fourth-quarter and fiscal 2023 results (ended Sep 30) on Oct 31, before market open. BEN’s quarterly results are anticipated to indicate year-over-year declines in earnings and revenues.
In the last reported quarter, Franklin’s earnings surpassed the Zacks Consensus Estimate on an increase in assets under management (AUM). However, rising expenses affected the bottom line to some extent.
Franklin’s earnings beat the consensus estimate in three of the trailing four quarters and missed once, the average surprise being 4.88%.
BEN’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for earnings of 60 cents per share for the fourth quarter of fiscal 2023 has moved 1.6% south over the past week. Also, the figure suggests a decline of 23.1% from the prior-year quarter. Our estimate for the metric is the same as the consensus number.
The consensus estimate for revenues is pegged at $1.87 billion, suggesting a decline of 3.6%. Our estimate stands at $1.88 billion.
Factors at Play
In the July-September quarter, the S&P 500 Index declined 3.3% sequentially, indicating unfavorable equity market performance. Fixed-income markets, too, saw notable negative performances, with the Bloomberg U.S. Aggregate Bond Index recording a decrease of 3.2%.
Hence, the September-end quarter’s performances of asset managers are expected to have been affected by transitory challenges in the industry like declining markets, the shift away from growth and uninspiring performances in certain U.S. equity strategies. Also, the swift decline in global markets, which depressed net flows across the industry in the first half of 2023, is expected to have continued in the quarter under review.
Hence, Franklin is likely to have witnessed a decrease in AUM due to overall outflows in equities and fixed income in the to-be-reported quarter.
The company has recorded net outflows every month in the fourth quarter of fiscal 2023, primarily due to unfavorable markets. The preliminary month-end AUM of $1.37 trillion as of Sep 30, 2023, indicates a decline of 4% from $1.43 trillion from the June-end figure.
These factors are likely to have hurt BEN’s investment management fees. The consensus estimate for the metric is $1.48 billion, indicating a fall of 8.1% from the previous quarter. Our projection for the metric is $1.54 billion.
The consensus estimate for sales and distribution fees of $306 million indicates a marginal rise. We estimate the metric to be $291.3 million.
On the cost front, its initiatives to leverage ongoing technological advancements are likely to have led to cost upsurges. Franklin is also expected to have incurred higher employee expenses due to rising salaries on account of inflation.
Q4 Management Guidance
The company expects compensation and benefits to be approximately $740 million, excluding performance fees.
It expects performance fees to be around $50 million.
Information systems and technology expenses are anticipated to be flat at around $120 million on a sequential basis.
Occupancy expenses are projected to remain in the high $50 million range, indicating a more normalization of return to the office.
General, administrative and other expenses are estimated to be in the mid $140 million range.
Earnings Whispers
According to our proven model, the chances of BEN beating the Zacks Consensus Estimate for earnings this time are low. This is because it does not have the right combination of two key elements, a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Franklin has an Earnings ESP of 0.00%.
Zacks Rank: The company currently carries a Zacks Rank of 5 (Strong Sell).
T. Rowe Price Group, Inc. (TROW - Free Report) reported third-quarter 2023 adjusted earnings per share of $2.17, which outpaced the Zacks Consensus Estimate of $1.76. The bottom line increased 16.7% year over year.
TROW's net revenues were supported by a rise in AUM. Further, appreciation in cash and cash equivalents will help the company to continue investing. However, a rise in expenses in the quarter under discussion hinders bottom-line growth.
Invesco’s (IVZ - Free Report) third-quarter 2023 adjusted earnings of 35 cents per share lagged the Zacks Consensus Estimate of 36 cents. The bottom line, however, rose 2.9% from the prior-year quarter.
IVZ’s results were hurt by a rise in operating expenses and lower revenues. Nevertheless, an increase in the AUM balance on decent inflows aided the results to some extent.
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Franklin (BEN) to Report Q4 Earnings: What's in the Cards?
Franklin Resources Inc. (BEN - Free Report) is scheduled to report its fourth-quarter and fiscal 2023 results (ended Sep 30) on Oct 31, before market open. BEN’s quarterly results are anticipated to indicate year-over-year declines in earnings and revenues.
In the last reported quarter, Franklin’s earnings surpassed the Zacks Consensus Estimate on an increase in assets under management (AUM). However, rising expenses affected the bottom line to some extent.
Franklin’s earnings beat the consensus estimate in three of the trailing four quarters and missed once, the average surprise being 4.88%.
Franklin Resources, Inc. Price and Consensus
Franklin Resources, Inc. price-consensus-chart | Franklin Resources, Inc. Quote
BEN’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for earnings of 60 cents per share for the fourth quarter of fiscal 2023 has moved 1.6% south over the past week. Also, the figure suggests a decline of 23.1% from the prior-year quarter. Our estimate for the metric is the same as the consensus number.
The consensus estimate for revenues is pegged at $1.87 billion, suggesting a decline of 3.6%. Our estimate stands at $1.88 billion.
Factors at Play
In the July-September quarter, the S&P 500 Index declined 3.3% sequentially, indicating unfavorable equity market performance. Fixed-income markets, too, saw notable negative performances, with the Bloomberg U.S. Aggregate Bond Index recording a decrease of 3.2%.
Hence, the September-end quarter’s performances of asset managers are expected to have been affected by transitory challenges in the industry like declining markets, the shift away from growth and uninspiring performances in certain U.S. equity strategies. Also, the swift decline in global markets, which depressed net flows across the industry in the first half of 2023, is expected to have continued in the quarter under review.
Hence, Franklin is likely to have witnessed a decrease in AUM due to overall outflows in equities and fixed income in the to-be-reported quarter.
The company has recorded net outflows every month in the fourth quarter of fiscal 2023, primarily due to unfavorable markets. The preliminary month-end AUM of $1.37 trillion as of Sep 30, 2023, indicates a decline of 4% from $1.43 trillion from the June-end figure.
These factors are likely to have hurt BEN’s investment management fees. The consensus estimate for the metric is $1.48 billion, indicating a fall of 8.1% from the previous quarter. Our projection for the metric is $1.54 billion.
The consensus estimate for sales and distribution fees of $306 million indicates a marginal rise. We estimate the metric to be $291.3 million.
On the cost front, its initiatives to leverage ongoing technological advancements are likely to have led to cost upsurges. Franklin is also expected to have incurred higher employee expenses due to rising salaries on account of inflation.
Q4 Management Guidance
The company expects compensation and benefits to be approximately $740 million, excluding performance fees.
It expects performance fees to be around $50 million.
Information systems and technology expenses are anticipated to be flat at around $120 million on a sequential basis.
Occupancy expenses are projected to remain in the high $50 million range, indicating a more normalization of return to the office.
General, administrative and other expenses are estimated to be in the mid $140 million range.
Earnings Whispers
According to our proven model, the chances of BEN beating the Zacks Consensus Estimate for earnings this time are low. This is because it does not have the right combination of two key elements, a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Franklin has an Earnings ESP of 0.00%.
Zacks Rank: The company currently carries a Zacks Rank of 5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Asset Managers
T. Rowe Price Group, Inc. (TROW - Free Report) reported third-quarter 2023 adjusted earnings per share of $2.17, which outpaced the Zacks Consensus Estimate of $1.76. The bottom line increased 16.7% year over year.
TROW's net revenues were supported by a rise in AUM. Further, appreciation in cash and cash equivalents will help the company to continue investing. However, a rise in expenses in the quarter under discussion hinders bottom-line growth.
Invesco’s (IVZ - Free Report) third-quarter 2023 adjusted earnings of 35 cents per share lagged the Zacks Consensus Estimate of 36 cents. The bottom line, however, rose 2.9% from the prior-year quarter.
IVZ’s results were hurt by a rise in operating expenses and lower revenues. Nevertheless, an increase in the AUM balance on decent inflows aided the results to some extent.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.