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Franklin (BEN) Q2 Earnings Miss, Revenues Beat on High AUM
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Franklin Resources Inc.’s (BEN - Free Report) second-quarter fiscal 2024 (ended Mar 31, 2023) adjusted earnings of 56 cents per share missed the Zacks Consensus Estimate of 57 cents. The bottom line declined 8% year over year.
BEN’s results have benefited from a rise in revenues and an improvement in the assets under management (AUM) balance. Also, the company’s balance sheet position remained robust in the quarter. However, higher expenses were headwinds.
Adjusted operating income was $419.6 million compared with the prior-year quarter’s $440.2 million. Also, net income attributable to Franklin was $124.2 million, down 36% year over year.
Revenues & Expenses Rise
Total operating revenues moved up 12% year over year to $2.15 billion. The reported figure surpassed the Zacks Consensus Estimate of $2.09 billion.
Investment management fees grew 9% year over year to $1.71 billion. We projected the same to be $1.65 billion. Sales and distribution fees increased nearly 19% to $358.3 million. Our estimate for the metric was $308.1 million.
Shareholder-servicing fees rose 57% on a year-over-year basis to $68 million. Our estimate was $38.8 million. Other revenues increased 37% to $12.6 million. We suggested other revenues to be $10.3 million.
Total operating expenses were up 21% year over year to $2.02 billion. Our estimate for the same was $1.49 billion.
Franklin reported an operating margin of 6% compared with 13.2% in the year-ago quarter.
AUM Increases
As of Mar 31, 2023, the total AUM was $1.64 trillion, up 13% sequentially. Our estimate was $1.56 trillion. Franklin’s long-term net inflows were $6.9 billion in the reported quarter against an outflow of $3.7 billion in the year-ago quarter.
The average AUM was $1.58 trillion, up 13% from the prior quarter. We projected the average AUM to be $1.51 trillion.
Capital Position Strong
As of Mar 31, 2023, cash and cash equivalents, along with investments, were $5.7 billion, while total stockholders' equity was $13.6 billion.
In the reported quarter, Franklin repurchased 0.4 million shares of its common stock for $11.7 million.
Our Viewpoint
The company’s efforts to diversify its business into asset classes that are seeing growing client demand will likely propel AUM growth. Its acquisitions expanded alternative investments and multi-asset solution platforms.
However, a challenging operating backdrop and several geopolitical concerns may significantly affect its AUM. Due to its focus on technological upgrades, costs may rise and weigh on bottom-line growth.
Franklin Resources, Inc. Price, Consensus and EPS Surprise
BlackRock, Inc.’s (BLK - Free Report) first-quarter 2024 adjusted earnings of $9.81 per share handily surpassed the Zacks Consensus Estimate of $9.42. The figure reflects a jump of 24% from the year-ago quarter.
BLK’s results benefited from a rise in revenues and higher non-operating income. Further, the AUM balance witnessed an improvement, driven by net inflows. However, higher expenses acted as a dampener.
Invesco’s (IVZ - Free Report) first-quarter 2024 adjusted earnings of 33 cents per share lagged the Zacks Consensus Estimate of 40 cents. The bottom line declined 13.2% from the prior-year quarter.
IVZ’s results were primarily hurt by a decline in adjusted revenues, along with higher adjusted expenses. However, an increase in the AUM balance on decent inflows was a positive.
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Franklin (BEN) Q2 Earnings Miss, Revenues Beat on High AUM
Franklin Resources Inc.’s (BEN - Free Report) second-quarter fiscal 2024 (ended Mar 31, 2023) adjusted earnings of 56 cents per share missed the Zacks Consensus Estimate of 57 cents. The bottom line declined 8% year over year.
BEN’s results have benefited from a rise in revenues and an improvement in the assets under management (AUM) balance. Also, the company’s balance sheet position remained robust in the quarter. However, higher expenses were headwinds.
Adjusted operating income was $419.6 million compared with the prior-year quarter’s $440.2 million. Also, net income attributable to Franklin was $124.2 million, down 36% year over year.
Revenues & Expenses Rise
Total operating revenues moved up 12% year over year to $2.15 billion. The reported figure surpassed the Zacks Consensus Estimate of $2.09 billion.
Investment management fees grew 9% year over year to $1.71 billion. We projected the same to be $1.65 billion. Sales and distribution fees increased nearly 19% to $358.3 million. Our estimate for the metric was $308.1 million.
Shareholder-servicing fees rose 57% on a year-over-year basis to $68 million. Our estimate was $38.8 million. Other revenues increased 37% to $12.6 million. We suggested other revenues to be $10.3 million.
Total operating expenses were up 21% year over year to $2.02 billion. Our estimate for the same was $1.49 billion.
Franklin reported an operating margin of 6% compared with 13.2% in the year-ago quarter.
AUM Increases
As of Mar 31, 2023, the total AUM was $1.64 trillion, up 13% sequentially. Our estimate was $1.56 trillion. Franklin’s long-term net inflows were $6.9 billion in the reported quarter against an outflow of $3.7 billion in the year-ago quarter.
The average AUM was $1.58 trillion, up 13% from the prior quarter. We projected the average AUM to be $1.51 trillion.
Capital Position Strong
As of Mar 31, 2023, cash and cash equivalents, along with investments, were $5.7 billion, while total stockholders' equity was $13.6 billion.
In the reported quarter, Franklin repurchased 0.4 million shares of its common stock for $11.7 million.
Our Viewpoint
The company’s efforts to diversify its business into asset classes that are seeing growing client demand will likely propel AUM growth. Its acquisitions expanded alternative investments and multi-asset solution platforms.
However, a challenging operating backdrop and several geopolitical concerns may significantly affect its AUM. Due to its focus on technological upgrades, costs may rise and weigh on bottom-line growth.
Franklin Resources, Inc. Price, Consensus and EPS Surprise
Franklin Resources, Inc. price-consensus-eps-surprise-chart | Franklin Resources, Inc. Quote
Currently, Franklin carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Asset Managers
BlackRock, Inc.’s (BLK - Free Report) first-quarter 2024 adjusted earnings of $9.81 per share handily surpassed the Zacks Consensus Estimate of $9.42. The figure reflects a jump of 24% from the year-ago quarter.
BLK’s results benefited from a rise in revenues and higher non-operating income. Further, the AUM balance witnessed an improvement, driven by net inflows. However, higher expenses acted as a dampener.
Invesco’s (IVZ - Free Report) first-quarter 2024 adjusted earnings of 33 cents per share lagged the Zacks Consensus Estimate of 40 cents. The bottom line declined 13.2% from the prior-year quarter.
IVZ’s results were primarily hurt by a decline in adjusted revenues, along with higher adjusted expenses. However, an increase in the AUM balance on decent inflows was a positive.