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What's in the Offing for Franklin (BEN) in Q3 Earnings?

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Franklin Resources (BEN - Free Report) is scheduled to report third-quarter fiscal 2021 results, before the opening bell, on Aug 3. The company’s results are anticipated to reflect year-over-year increases in earnings and revenues.

In the last reported quarter, Franklin’s earnings surpassed the Zacks Consensus Estimate by 6.8%. The company’s results displayed revenue growth, with support from a solid rise in assets under management (AUM). However, a rise in expenses and net outflows were the offsetting factors.

Franklin beat estimates in three of the trailing four quarters and missed in one, the average surprise being 5.4%.

Franklin Resources, Inc. Price and EPS Surprise


Franklin Resources, Inc. Price and EPS Surprise

Franklin Resources, Inc. price-eps-surprise | Franklin Resources, Inc. Quote

Prior to the fiscal third-quarter earnings release, the company is witnessing downward estimate revision, indicating the bearish sentiment of analysts. The Zacks Consensus Estimate for third-quarter earnings has been revised 6.6% downward to 76 cents over the past month. Nonetheless, the figure suggests year-over-year growth of 8.6%.

The Zacks Consensus Estimate for revenues of $2.1 billion indicates a year-over-year jump of 79.5%.

Factors to Note

Strong Markets: The performance of equity markets was decent in the June-end quarter. The S&P 500 Index rallied 7.4% sequentially in the quarter. Capitalizing on the momentum in the previous quarter, industry fund flows have been decent in the April-June period, backed by fixed income and international equity. These are likely to have supported the California-based asset manager’s performance to an extent.

Higher AUM: Despite relatively low volatility and market normalization in the quarter under review, client activity was decent. The quarter witnessed overall asset inflows, which along with decent client activity is expected to have aided AUM growth.

Franklin reported a preliminary AUM balance of $1,552.1 billion for June 2021. This reflects 3.5% growth from $1,498.8 billion recorded as of Mar 30, 2021.

Nonetheless, foreign exchange is likely to have been a headwind as dollar strengthened against other notable currencies.

Controlled Expenses: Following the addition of Legg Mason, Franklin has been on track to realize gross synergies, with savings likely to be realized by the end of fiscal 2021. This is expected to get reflected in the fiscal third-quarter results as well. However, expenses are likely to have increased due to higher AUM-driven costs and non-recurring costs from fund launches.

Let’s have a look at what our quantitative model predicts:

Franklin does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Franklin is 0.00%.

Zacks Rank: Franklin currently carries a Zacks Rank of 3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks Worth a Look

Here are some finance stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.

Federal Realty Investment Trust (FRT - Free Report) is slated to release results on Aug 4. It has an Earnings ESP of +2.11% and carries a Zacks Rank #3 at present.

Public Storage (PSA - Free Report) currently has an Earnings ESP of +0.89% and a Zacks Rank #3. It is scheduled to report results on Aug 3.

Macerich (MAC - Free Report) presently has an Earnings ESP of +4.30% and a Zacks Rank #3. It is scheduled to report results on Aug 4.