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Franklin (BEN) Reports Impressive Q3 Earnings, Costs Down
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Franklin Resources Inc. (BEN - Free Report) recorded a positive earnings surprise of 16.7% in third-quarter fiscal 2016 (ended Jun 30), driven by lower expenses. The company reported earnings of 77 cents per share, surpassing the Zacks Consensus Estimate of 66 cents. However, results compared unfavorably with the prior-year quarter earnings of 82 cents per share.
The better-than-expected results came on the back of reduced expenses. However, lower revenues and assets under management (AUM) were a major drag.
Net income totaled $446.4 million in the quarter compared with $504.2 million in the prior-year quarter.
Total operating revenue fell 18% year over year to $1.63 billion in the quarter, mainly due to lower investment management, sales and distribution along with shareholder servicing fees. Yet, revenues exceeded the Zacks Consensus Estimate of $1.61 billion.
Investment management fees decreased 18% year over year to $1.09 billion, while sales and distribution fees declined 21% year over year to $450.2 million. Moreover, shareholder servicing fees contracted 8% on a year-over-year basis to $61.5 million, while other net revenues climbed 9% year over year to $29.1 million.
Total operating expenses decreased 16% year over year to $1.04 billion. The fall resulted primarily from a decline in almost all components of expenses.
As of Jun 30, 2016, total AUM was $732.1 billion, down from $866.5 billion as of Jun 30, 2015. Notably, the quarter recorded net new outflows of $19.2 billion, partially mitigated by market appreciation and other of $9.8 billion. Simple monthly average AUM of $739.8 billion decreased 16% year over year.
Strong Capital Position
As of Jun 30, 2016, cash and cash equivalents along with investments were $10.7 billion, up from the level of $10.6 billion as of Sep 30, 2015. Moreover, total stockholders' equity was $12.4 billion, compared with $12.5 billion as of Sep 30, 2015.
During the reported quarter, Franklin repurchased 9.3 million shares of its common stock at a total cost of $326.7 million.
Our Viewpoint
Franklin posted decent results in the quarter under review. Though the company’s global footprint is an exceptionally favorable strategic point as its AUM is well diversified but regulatory restrictions and sluggish economic recovery could mar AUM growth further and also increase costs. Moreover, lower revenues remain a concern.
Currently, Franklin carries a Zacks Rank #3 (Hold).
Competitive Landscape
T. Rowe Price Group, Inc. (TROW - Free Report) reported second-quarter fiscal 2016 net income of 76 cents per share missing the Zacks Consensus Estimate of $1.13. Moreover, the reported figure decreased from the year-ago earnings of $1.24. Notably, results included non-recurring operating charge associated with the compensation to certain clients in relation to the Dell appraisal rights matter which resulted in reduced net income by 39 cents per share.
Janus Capital Group, Inc. recorded a negative earnings surprise of 4.55% in second-quarter 2016. The company reported earnings per share attributable to common shareholders of 21 cents, missing the Zacks Consensus Estimate by a penny. Moreover, results fell below the prior-year quarter figure of 23 cents.
Ameriprise Financial Inc. (AMP - Free Report) reported second-quarter fiscal 2016 operating earnings per share of $2.23, missing the Zacks Consensus Estimate of $2.27. The figure also represents a year-over-year decrease of 4.5%. The results came in lower than expected primarily due to a drop in revenues. However, a decline in operating expenses and increase in AUM and assets under administration were the positives.
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Franklin (BEN) Reports Impressive Q3 Earnings, Costs Down
Franklin Resources Inc. (BEN - Free Report) recorded a positive earnings surprise of 16.7% in third-quarter fiscal 2016 (ended Jun 30), driven by lower expenses. The company reported earnings of 77 cents per share, surpassing the Zacks Consensus Estimate of 66 cents. However, results compared unfavorably with the prior-year quarter earnings of 82 cents per share.
The better-than-expected results came on the back of reduced expenses. However, lower revenues and assets under management (AUM) were a major drag.
Net income totaled $446.4 million in the quarter compared with $504.2 million in the prior-year quarter.
Revenue Falls; Effective Cost Control Reflected
Total operating revenue fell 18% year over year to $1.63 billion in the quarter, mainly due to lower investment management, sales and distribution along with shareholder servicing fees. Yet, revenues exceeded the Zacks Consensus Estimate of $1.61 billion.
Investment management fees decreased 18% year over year to $1.09 billion, while sales and distribution fees declined 21% year over year to $450.2 million. Moreover, shareholder servicing fees contracted 8% on a year-over-year basis to $61.5 million, while other net revenues climbed 9% year over year to $29.1 million.
Total operating expenses decreased 16% year over year to $1.04 billion. The fall resulted primarily from a decline in almost all components of expenses.
As of Jun 30, 2016, total AUM was $732.1 billion, down from $866.5 billion as of Jun 30, 2015. Notably, the quarter recorded net new outflows of $19.2 billion, partially mitigated by market appreciation and other of $9.8 billion. Simple monthly average AUM of $739.8 billion decreased 16% year over year.
Strong Capital Position
As of Jun 30, 2016, cash and cash equivalents along with investments were $10.7 billion, up from the level of $10.6 billion as of Sep 30, 2015. Moreover, total stockholders' equity was $12.4 billion, compared with $12.5 billion as of Sep 30, 2015.
During the reported quarter, Franklin repurchased 9.3 million shares of its common stock at a total cost of $326.7 million.
Our Viewpoint
Franklin posted decent results in the quarter under review. Though the company’s global footprint is an exceptionally favorable strategic point as its AUM is well diversified but regulatory restrictions and sluggish economic recovery could mar AUM growth further and also increase costs. Moreover, lower revenues remain a concern.
FRANKLIN RESOUR Price, Consensus and EPS Surprise
FRANKLIN RESOUR Price, Consensus and EPS Surprise | FRANKLIN RESOUR Quote
Currently, Franklin carries a Zacks Rank #3 (Hold).
Competitive Landscape
T. Rowe Price Group, Inc. (TROW - Free Report) reported second-quarter fiscal 2016 net income of 76 cents per share missing the Zacks Consensus Estimate of $1.13. Moreover, the reported figure decreased from the year-ago earnings of $1.24. Notably, results included non-recurring operating charge associated with the compensation to certain clients in relation to the Dell appraisal rights matter which resulted in reduced net income by 39 cents per share.
Janus Capital Group, Inc. recorded a negative earnings surprise of 4.55% in second-quarter 2016. The company reported earnings per share attributable to common shareholders of 21 cents, missing the Zacks Consensus Estimate by a penny. Moreover, results fell below the prior-year quarter figure of 23 cents.
Ameriprise Financial Inc. (AMP - Free Report) reported second-quarter fiscal 2016 operating earnings per share of $2.23, missing the Zacks Consensus Estimate of $2.27. The figure also represents a year-over-year decrease of 4.5%. The results came in lower than expected primarily due to a drop in revenues. However, a decline in operating expenses and increase in AUM and assets under administration were the positives.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>