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Key Factors Set to Affect Franklin's (BEN) Earnings in Q2
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Franklin ResourcesInc. (BEN - Free Report) is scheduled to report second-quarter fiscal 2023 results on May 1, before market open. BEN’s results are anticipated to indicate year-over-year declines in earnings and revenues.
In the last reported quarter, Franklin’s earnings missed the Zacks Consensus Estimate due to declines in revenues and higher expenses. A fall in AUM was another major drag.
Franklin’s earnings beat estimates in three of the trailing four quarters and missed in the other, the average surprise being 10.3%.
BEN’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for earnings of 57 cents per share for the fiscal second quarter has moved marginally down in the past week. Also, the figure suggests a decline of 40.6% from the prior-year quarter's reported number. Our estimate for the same is 55 cents.
The consensus estimate for revenues is pegged at $1.83 billion, suggesting a decline of 12% from the prior quarter’s reported number. Our estimate for the same is $1.72 billion.
Key Q1 Estimates & Factors to Note
In the March-end quarter, the S&P 500 Index increased 7.4% sequentially, indicating favorable equity markets. Fixed-income markets, too, saw notable negative performances, with the Barclays U.S. Aggregate Bond Index recording a rise of 3%.
However, the March-end quarter’s performances of asset managers are expected to have been affected by transitory challenges in the industry like declining markets, the shift away from growth and uninspiring performances in certain U.S. equity strategies.
Amid the challenging operating environment, BEN is likely to have continued to record net outflows in the first quarter. Per the company’s monthly metrics data, it recorded net outflows of $3.7 billion in the quarter under review, hindering its asset under management (AUM) growth.
The preliminary month-end AUM of $1.42 trillion as of Mar 31, 2023, indicates a rise of 2.5% from the December-end figure.
Market fluctuations and foreign exchange translations are likely to have hurt investment management fees and affected Franklin’s financials. The consensus estimate for investment management fees of $1.42 billion indicates a fall of 13% from the previous quarter’s reported figure. Our projection for the same is $1.39 billion.
The consensus estimate for sales and distribution fees of $302.2 million indicates a rise of 3.5% from the previous quarter’s reported figure. Our projection for the same is $281.4 million.
On the cost front, the company’s initiatives to leverage ongoing technological advancements are likely to have led to cost upsurges. Franklin Resources is expected to have incurred higher employee expenses due to rising salaries on account of inflation. These are expected to have affected bottom-line growth in the quarter under review.
The company expects compensation and benefits between $700 million and $710 million (assuming performance fees of $50 million). Information systems and technology expenses are anticipated to be relatively flat on a sequential basis (between $115 million and $120 million). Occupancy expenses are expected to remain flat sequentially, assuming 60% occupancy, reflecting a more normalization of return to office. General, administrative and other expenses are anticipated to be in the higher range of $140 million.
Earnings Whispers
Our proven model predicts that an earnings beat is likely for Franklin this time around. This is because Franklin has the right combination of the two key ingredients — a positive Earnings ESP and a 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: Franklin has an Earnings ESP of +0.70.
Zacks Rank: Franklin currently carries a Zacks Rank of 3.
Stocks to Consider
A couple of finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Federated Hermes (FHI - Free Report) and Ares Management (ARES - Free Report) .
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Key Factors Set to Affect Franklin's (BEN) Earnings in Q2
Franklin Resources Inc. (BEN - Free Report) is scheduled to report second-quarter fiscal 2023 results on May 1, before market open. BEN’s results are anticipated to indicate year-over-year declines in earnings and revenues.
In the last reported quarter, Franklin’s earnings missed the Zacks Consensus Estimate due to declines in revenues and higher expenses. A fall in AUM was another major drag.
Franklin’s earnings beat estimates in three of the trailing four quarters and missed in the other, the average surprise being 10.3%.
Franklin Resources, Inc. Price and EPS Surprise
Franklin Resources, Inc. price-eps-surprise | Franklin Resources, Inc. Quote
BEN’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for earnings of 57 cents per share for the fiscal second quarter has moved marginally down in the past week. Also, the figure suggests a decline of 40.6% from the prior-year quarter's reported number. Our estimate for the same is 55 cents.
The consensus estimate for revenues is pegged at $1.83 billion, suggesting a decline of 12% from the prior quarter’s reported number. Our estimate for the same is $1.72 billion.
Key Q1 Estimates & Factors to Note
In the March-end quarter, the S&P 500 Index increased 7.4% sequentially, indicating favorable equity markets. Fixed-income markets, too, saw notable negative performances, with the Barclays U.S. Aggregate Bond Index recording a rise of 3%.
However, the March-end quarter’s performances of asset managers are expected to have been affected by transitory challenges in the industry like declining markets, the shift away from growth and uninspiring performances in certain U.S. equity strategies.
Amid the challenging operating environment, BEN is likely to have continued to record net outflows in the first quarter. Per the company’s monthly metrics data, it recorded net outflows of $3.7 billion in the quarter under review, hindering its asset under management (AUM) growth.
The preliminary month-end AUM of $1.42 trillion as of Mar 31, 2023, indicates a rise of 2.5% from the December-end figure.
Market fluctuations and foreign exchange translations are likely to have hurt investment management fees and affected Franklin’s financials. The consensus estimate for investment management fees of $1.42 billion indicates a fall of 13% from the previous quarter’s reported figure. Our projection for the same is $1.39 billion.
The consensus estimate for sales and distribution fees of $302.2 million indicates a rise of 3.5% from the previous quarter’s reported figure. Our projection for the same is $281.4 million.
On the cost front, the company’s initiatives to leverage ongoing technological advancements are likely to have led to cost upsurges. Franklin Resources is expected to have incurred higher employee expenses due to rising salaries on account of inflation. These are expected to have affected bottom-line growth in the quarter under review.
The company expects compensation and benefits between $700 million and $710 million (assuming performance fees of $50 million). Information systems and technology expenses are anticipated to be relatively flat on a sequential basis (between $115 million and $120 million). Occupancy expenses are expected to remain flat sequentially, assuming 60% occupancy, reflecting a more normalization of return to office. General, administrative and other expenses are anticipated to be in the higher range of $140 million.
Earnings Whispers
Our proven model predicts that an earnings beat is likely for Franklin this time around. This is because Franklin has the right combination of the two key ingredients — a positive Earnings ESP and a 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: Franklin has an Earnings ESP of +0.70.
Zacks Rank: Franklin currently carries a Zacks Rank of 3.
Stocks to Consider
A couple of finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Federated Hermes (FHI - Free Report) and Ares Management (ARES - Free Report) .
The Earnings ESP for Federated Hermes is +2.72%. AMP currently carries a Zacks Rank #2 (Buy). The company is slated to report results on Apr 27. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ares Management is scheduled to release quarterly results on Apr 28. ARES currently has a Zacks Rank #3 and an Earnings ESP of +2.30%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.