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Franklin (BEN) Q3 Earnings Top Estimates, Revenues & AUM Dip
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Franklin Resources Inc. (BEN - Free Report) has reported third-quarter fiscal 2022 (ended Jun 30) adjusted earnings of 82 cents per share, which beat the Zacks Consensus Estimate of 73 cents. However, the bottom line declined 15% from the prior-year quarter.
While lower expenses alleviated the bottom-line pressure to some extent, BEN’s results display top-line weakness in the quarter, underlining substantial drawdowns in both equities and fixed-income markets. A decline in assets under management (AUM) was another major drag.
Adjusted operating income was $566.9 million in the reported quarter compared with the prior-year quarter’s $601.2 million.
Net income was $256.4 million, down 42% year over year.
Revenues Fall on Low Investment Management Fees, Costs Dip
Total operating revenues declined 7% year over year to $2.03 billion in the fiscal third quarter on higher investment management fees. Nonetheless, the reported figure outpaced the Zacks Consensus Estimate of $2.01 billion.
Investment management fees fell 4% year over year to $1.63 billion, while other revenues jumped 55% to $12.7 million. Sales and distribution fees were 30% down to $335.6 million. Shareholder-servicing fees declined 7% on a year-over-year basis to $46.9 million.
Total operating expenses were 4% down year over year to $1.62 billion.
Franklin has reported an operating margin of 19.9% compared with 22% in the year-ago quarter.
AUM Declines
As of Jun 30, 2022, the total AUM was $1.37 trillion, down 7% sequentially. Franklin’s net new outflows were $19.8 billion in the reported quarter.
Average AUM was recorded at $1.43 trillion, down 5% sequentially.
Capital Position
As of Jun 30, 2022, cash and cash equivalents, along with investments, were $5.5 billion, while the total stockholders' equity was $12.3 billion.
In the reported quarter, Franklin repurchased 2 million shares for $51 million.
Our Viewpoint
Franklin’s global footprint is an exceptionally favorable strategic point, as its AUM is well-diversified. The company announced the acquisition of BNY Alcentra Group Holdings, Inc. in May.Through the acquisition of Alcentra, Franklin’s U.S. alternative credit specialist investment manager, Benefit Street Partners, will be able to expand its alternative credit capabilities and presence in Europe, doubling its AUM to $77 billion globally.
However, heightening concerns over inflation due to disrupted supply chains, product and material shortages, and high demand (boosted by past fiscal and monetary stimulus activities) weighed on investor sentiments. Continued geopolitical tensions and the resulting sanctions introduced threats to global economic growth. Hence, Franklin is likely to witness a decrease in AUM in the near term.
Franklin Resources, Inc. Price, Consensus and EPS Surprise
Invesco’s (IVZ - Free Report) second-quarter 2022 adjusted earnings of 39 cents per share missed the Zacks Consensus Estimate of 52 cents by a significant margin. The bottom line also plunged 50% from the prior-year quarter.
IVZ’s results were adversely impacted by lower AUM balance and long-term outflows, which hurt revenues. However, a slight decline in operating expenses was a tailwind.
SEI Investments Co.’s (SEIC - Free Report) second-quarter 2022 earnings of 81 cents per share lagged the Zacks Consensus Estimate by a penny. The bottom line reflects a decline of 12.9% from the prior-year quarter.
SEIC’s results were hurt by a rise in expenses. However, growth in revenues and an increase in AUM balance were tailwinds.
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Franklin (BEN) Q3 Earnings Top Estimates, Revenues & AUM Dip
Franklin Resources Inc. (BEN - Free Report) has reported third-quarter fiscal 2022 (ended Jun 30) adjusted earnings of 82 cents per share, which beat the Zacks Consensus Estimate of 73 cents. However, the bottom line declined 15% from the prior-year quarter.
While lower expenses alleviated the bottom-line pressure to some extent, BEN’s results display top-line weakness in the quarter, underlining substantial drawdowns in both equities and fixed-income markets. A decline in assets under management (AUM) was another major drag.
Adjusted operating income was $566.9 million in the reported quarter compared with the prior-year quarter’s $601.2 million.
Net income was $256.4 million, down 42% year over year.
Revenues Fall on Low Investment Management Fees, Costs Dip
Total operating revenues declined 7% year over year to $2.03 billion in the fiscal third quarter on higher investment management fees. Nonetheless, the reported figure outpaced the Zacks Consensus Estimate of $2.01 billion.
Investment management fees fell 4% year over year to $1.63 billion, while other revenues jumped 55% to $12.7 million. Sales and distribution fees were 30% down to $335.6 million. Shareholder-servicing fees declined 7% on a year-over-year basis to $46.9 million.
Total operating expenses were 4% down year over year to $1.62 billion.
Franklin has reported an operating margin of 19.9% compared with 22% in the year-ago quarter.
AUM Declines
As of Jun 30, 2022, the total AUM was $1.37 trillion, down 7% sequentially. Franklin’s net new outflows were $19.8 billion in the reported quarter.
Average AUM was recorded at $1.43 trillion, down 5% sequentially.
Capital Position
As of Jun 30, 2022, cash and cash equivalents, along with investments, were $5.5 billion, while the total stockholders' equity was $12.3 billion.
In the reported quarter, Franklin repurchased 2 million shares for $51 million.
Our Viewpoint
Franklin’s global footprint is an exceptionally favorable strategic point, as its AUM is well-diversified. The company announced the acquisition of BNY Alcentra Group Holdings, Inc. in May.Through the acquisition of Alcentra, Franklin’s U.S. alternative credit specialist investment manager, Benefit Street Partners, will be able to expand its alternative credit capabilities and presence in Europe, doubling its AUM to $77 billion globally.
However, heightening concerns over inflation due to disrupted supply chains, product and material shortages, and high demand (boosted by past fiscal and monetary stimulus activities) weighed on investor sentiments. Continued geopolitical tensions and the resulting sanctions introduced threats to global economic growth. Hence, Franklin is likely to witness a decrease in AUM in the near term.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Stocks
Invesco’s (IVZ - Free Report) second-quarter 2022 adjusted earnings of 39 cents per share missed the Zacks Consensus Estimate of 52 cents by a significant margin. The bottom line also plunged 50% from the prior-year quarter.
IVZ’s results were adversely impacted by lower AUM balance and long-term outflows, which hurt revenues. However, a slight decline in operating expenses was a tailwind.
SEI Investments Co.’s (SEIC - Free Report) second-quarter 2022 earnings of 81 cents per share lagged the Zacks Consensus Estimate by a penny. The bottom line reflects a decline of 12.9% from the prior-year quarter.
SEIC’s results were hurt by a rise in expenses. However, growth in revenues and an increase in AUM balance were tailwinds.