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Growth in AUM Likely to Support Franklin's (BEN) Q3 Earnings
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Franklin ResourcesInc. (BEN - Free Report) is scheduled to report third-quarter fiscal 2023 results on Jul 28, 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 surpassed the Zacks Consensus Estimate on a rise in assets under management (AUM). However, rising expenses affected the bottom line to some extent.
Franklin’s earnings beat estimates in three of the trailing four quarters and missed once, the average surprise being 6.71%.
BEN’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for earnings of 60 cents per share for the fiscal third quarter has remained unchanged in the past 60 days. Also, the figure suggests a decline of 26.8% from the prior-year quarter's reported number. Our estimate for the same is 59 cents.
The consensus estimate for revenues is pegged at $1.91 billion, suggesting a decline of 6.2% from the prior-year quarter’s reported number.
Factors At Play
Favorable equity markets is likely to have supported June-end quarter’s performances of asset managers to some extent. In fact, S&P 500 Index increased 8.3% sequentially in the quarter under review, indicating favorable equity markets.
However, challenges in investment management industry accompanied by an economic slowdown are likely to affect results in the to-be-reported quarter. Moreover, fixed-income markets saw negative performances during the quarter.
Favorable market performance in the quarter is likely to have driven long-term net inflows, per the company’s monthly metrics data. Hence, BEN’s AUM balance is likely to have increased. The preliminary month-end AUM of $1.43 trillion as of Jun 30, 2023, indicates a rise of 1% from the March-end figure.
However, despite growth in AUM, the Zacks Consensus Estimate for investment management fees of $1.47 billion indicates a fall of 6.3% from the previous quarter’s reported figure. Our projection for the same is $1.44 billion.
The consensus estimate for sales and distribution fees of $301 million remains flat from the previous quarter’s reported figure. we estimate the metric to be $278.3 million.
On the cost front, Franklin is expected to have incurred higher employee expenses due to rising salaries on account of inflation. These are likely to have affected bottom-line growth in the quarter under review.
The company estimates compensation and benefits to be $725 million and performance fees of around $50 million in the third quarter of fiscal 2023. Information systems and technology expenses are anticipated to be relatively flat on a sequential basis (around $120 million). Occupancy expenses are projected in the high $50 million range, reflecting a more normalization of return to the office. General, administrative and other expenses are anticipated in the mid $140 million range.
Key Development During the Quarter
In May, Franklin entered into a strategic partnership with Great-West Lifeco to acquire Putnam Investments from it. With $136 billion in AUM as of April 2023 end, Putnam Investments is a global asset management firm. This will be acquired for around $925 million in a stock-and-cash deal. With this, Great-West Lifeco will hold a 6.2% stake in BEN.
Great-West Lifeco will also provide an initial long-term AUM of $25 billion to Franklin Templeton’sspecialist investment managers within 12 months of closing. This amount is expected to increase in the next several years.
The transaction is expected to close in fourth-quarter 2023, subject to customary closing norms.
The acquisition of Putnam Investments will increase BEN’s defined contribution AUM to around $90 billion and expand its insurance-related AUM to $150 billion, thereby accelerating BEN’s growth in the retirement markets. It will also add scale and efficiency to the mutual fund platform.
This transaction is anticipated to be modestly accretive to run-rate adjusted EPS by the end of the first year after deal closure, including cost synergies.
Earnings Whispers
Our proven model does not predict an earnings beat for BEN this time around. This is because Franklin does not have the right combination of 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 -0.28%.
Zacks Rank: Franklin currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Ares Management Corporation (ARES - Free Report) are a couple of stocks that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for FCNCA is +3.21% and the stock currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 3.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
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Growth in AUM Likely to Support Franklin's (BEN) Q3 Earnings
Franklin Resources Inc. (BEN - Free Report) is scheduled to report third-quarter fiscal 2023 results on Jul 28, 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 surpassed the Zacks Consensus Estimate on a rise in assets under management (AUM). However, rising expenses affected the bottom line to some extent.
Franklin’s earnings beat estimates in three of the trailing four quarters and missed once, the average surprise being 6.71%.
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 60 cents per share for the fiscal third quarter has remained unchanged in the past 60 days. Also, the figure suggests a decline of 26.8% from the prior-year quarter's reported number. Our estimate for the same is 59 cents.
The consensus estimate for revenues is pegged at $1.91 billion, suggesting a decline of 6.2% from the prior-year quarter’s reported number.
Factors At Play
Favorable equity markets is likely to have supported June-end quarter’s performances of asset managers to some extent. In fact, S&P 500 Index increased 8.3% sequentially in the quarter under review, indicating favorable equity markets.
However, challenges in investment management industry accompanied by an economic slowdown are likely to affect results in the to-be-reported quarter. Moreover, fixed-income markets saw negative performances during the quarter.
Favorable market performance in the quarter is likely to have driven long-term net inflows, per the company’s monthly metrics data. Hence, BEN’s AUM balance is likely to have increased. The preliminary month-end AUM of $1.43 trillion as of Jun 30, 2023, indicates a rise of 1% from the March-end figure.
However, despite growth in AUM, the Zacks Consensus Estimate for investment management fees of $1.47 billion indicates a fall of 6.3% from the previous quarter’s reported figure. Our projection for the same is $1.44 billion.
The consensus estimate for sales and distribution fees of $301 million remains flat from the previous quarter’s reported figure. we estimate the metric to be $278.3 million.
On the cost front, Franklin is expected to have incurred higher employee expenses due to rising salaries on account of inflation. These are likely to have affected bottom-line growth in the quarter under review.
The company estimates compensation and benefits to be $725 million and performance fees of around $50 million in the third quarter of fiscal 2023. Information systems and technology expenses are anticipated to be relatively flat on a sequential basis (around $120 million). Occupancy expenses are projected in the high $50 million range, reflecting a more normalization of return to the office. General, administrative and other expenses are anticipated in the mid $140 million range.
Key Development During the Quarter
In May, Franklin entered into a strategic partnership with Great-West Lifeco to acquire Putnam Investments from it. With $136 billion in AUM as of April 2023 end, Putnam Investments is a global asset management firm. This will be acquired for around $925 million in a stock-and-cash deal. With this, Great-West Lifeco will hold a 6.2% stake in BEN.
Great-West Lifeco will also provide an initial long-term AUM of $25 billion to Franklin Templeton’sspecialist investment managers within 12 months of closing. This amount is expected to increase in the next several years.
The transaction is expected to close in fourth-quarter 2023, subject to customary closing norms.
The acquisition of Putnam Investments will increase BEN’s defined contribution AUM to around $90 billion and expand its insurance-related AUM to $150 billion, thereby accelerating BEN’s growth in the retirement markets. It will also add scale and efficiency to the mutual fund platform.
This transaction is anticipated to be modestly accretive to run-rate adjusted EPS by the end of the first year after deal closure, including cost synergies.
Earnings Whispers
Our proven model does not predict an earnings beat for BEN this time around. This is because Franklin does not have the right combination of 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 -0.28%.
Zacks Rank: Franklin currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Ares Management Corporation (ARES - Free Report) are a couple of stocks that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for FCNCA is +3.21% and the stock currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 3.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
ARES currently has an Earnings ESP of +0.20% and a Zacks Rank #3. It is scheduled to release second-quarter 2023 results on Aug 1.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for ARES’s second-quarter earnings has moved 2.3% south over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.