Back to top

Image: Bigstock

Franklin (BEN) Dips on Q1 Earnings Miss, Revenues Decline Y/Y

Read MoreHide Full Article

Franklin Resources Inc.’s (BEN - Free Report) first-quarter fiscal 2023 (ended Dec 31, 2022) adjusted earnings of 51 cents per share lagged the Zacks Consensus Estimate of 54 cents. The bottom line declined 53% from the prior-year quarter. Our estimate for earnings was 52 cents.

Shares of the company lost 4% in pre-market trading. A full-day trading session will depict a clearer picture.

BEN’s results have been hurt by a decline in revenues and higher expenses. A fall in assets under management (AUM) was another major drag. Nevertheless, the company’s balance sheet position remained robust in the quarter under review.

Adjusted operating income was $395.1 million compared with the prior-year quarter’s $685.9 million. Net income attributable to Franklin was $165.6 million, down 63% year over year.

Revenues Decline, Expenses Rise

Total operating revenues declined 12% year over year to $1.97 billion. The reported figure outpaced the Zacks Consensus Estimate of $1.80 billion. We had projected operating revenues of $1.79 billion.

Investment management fees fell 7% year over year to $1.63 billion. We had projected the same to be $1.43 billion. Sales and distribution fees were down 27% to $291.9 million. Our estimate for the metric was $304.9 million.

Shareholder-servicing fees declined 30% on a year-over-year basis to $33.4 million. Our estimate was $41.7 million. Other revenues fell 43% to $10 million. We had projected other revenues of $10.8 million.

Total operating expenses were up 6% year over year to $1.77 billion. Our estimate for the same was $1.51 billion.

Franklin reported an operating margin of 9.9% compared with 25.1% in the year-ago quarter.

AUM Declines

As of Dec 31, 2022, the total AUM was $1.39 trillion, down 12% year over year. Our estimate for AUM was $1.40 trillion. Franklin’s long-term net outflows were $10.9 billion in the reported quarter.

Average AUM was $1.35 trillion, down 13% from the prior-year quarter. We had projected average AUM of $1.35 trillion.

Capital Position Strong

As of Dec 31, 2022, cash and cash equivalents, along with investments, were $5.6 billion, while the total stockholders' equity was $12.6 billion.

In the reported quarter, Franklin repurchased 0.5 million shares for $14.2 million.

Our Viewpoint

Franklin’s efforts to diversify its business into asset classes, which are seeing rising client demand, will likely propel AUM growth. Its acquisitions have expanded alternative investments and multi-asset solution platforms.

In November, the company completed the acquisition of Alcentra from BNY Mellon. The transaction is expected to strengthen the breadth and scale of Franklin’s alternative asset strategies.

However, a challenging operating backdrop and several geopolitical concerns have significantly affected BEN’s AUM. Due to the focus on technological upgrades, costs may rise and weigh on bottom-line growth.

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) fourth-quarter 2022 adjusted earnings of $8.93 per share surpassed the Zacks Consensus Estimate of $7.99. The figure reflects a decrease of 16.4% from the year-ago quarter.

BLK’s results benefited from a decline in expenses. However, lower revenues and assets under management balance were the major headwinds.

Invesco’s (IVZ - Free Report) fourth-quarter 2022 adjusted earnings of 39 cents per share surpassed the Zacks Consensus Estimate of 36 cents. The bottom line, however, plunged 54.7% from the prior-year quarter. Our estimate for earnings was 33 cents.

IVZ’s results benefited from a decline in operating expenses. However, lower assets under management balance and long-term outflows hurt revenues.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

Franklin Resources, Inc. (BEN) - free report >>

BlackRock, Inc. (BLK) - free report >>

Invesco Ltd. (IVZ) - free report >>

Published in