Franklin Resources Inc. (BEN Quick QuoteBEN - Free Report) reported fourth-quarter fiscal 2023 (ended Sep 30) adjusted earnings of 84 cents per share, which beat the Zacks Consensus Estimate of 60 cents. The bottom line also increased 7.7% from the prior-year quarter.

BEN’s results display top-line strength from the prior quarter. However, rising expenses affected the bottom line to some extent. A decline in assets under management (AUM) was another major drag.

Net income attributable to BEN was $295.5 million, up 27% year over year. Our estimate for the metric was $207.8 million.

For fiscal 2023, adjusted earnings per share were $2.60 compared with the $3.63 recorded in the prior year.

Revenues & Expenses Rise

For fiscal 2023, total operating revenues fell 5.1% year over year to $7.85 billion. The revenue figure beat the Zacks Consensus Estimate of $7.73 billion.

Total operating revenues increased 2.4% year over year to $1.99 billion in the fiscal fourth quarter on higher investment management fees. The reported figure also outpaced the Zacks Consensus Estimate of $1.87 billion.

Investment management fees rose 4% year over year to $1.63 billion. We projected the same to be $1.54 billion.

However, sales and distribution fees declined 1.5% to $306.4 million. We projected the metric to be $291.3 million. Shareholder-servicing fees declined 19.5% on a year-over-year basis to $37.2 million. We projected the metric to be $39 million. Other revenues fell 25% to $8.1 million.

Total operating expenses rose 3.6% year over year to $1.65 billion. The rise was due to an increase in almost all the components of operating expenses except lower general, administrative and other expenditures. Our estimate for the metric stands at $1.47 billion.

Franklin reported an operating margin of 17% compared with 18% in the year-ago quarter.

AUM Declines

As of Sep 30, 2023, total AUM was $1.37 trillion, down 4% sequentially. We projected the same to be $1.56 trillion.

Franklin’s long-term net outflows were $6.9 billion in the reported quarter.
Average AUM was $1.42 trillion, which remained flat sequentially. We had projected an average AUM of $1.5 trillion.

Capital Position

As of Sep 30, 2023, cash and cash equivalents, and investments were $5.9 billion, while total stockholders' equity was $12.5 billion.

In the reported quarter, Franklin repurchased 7 million shares for $187.6 million.

Our Viewpoint

The company’s efforts to diversify its business into asset classes that are seeing growing client demand will likely propel AUM growth. Its acquisitions expanded alternative investments and multi-asset solution platforms.

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

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 Asset Managers

Ameriprise Financial’s (AMP Quick QuoteAMP - Free Report) third-quarter 2023 adjusted operating earnings (excluding unlocking) of $7.68 per share handily surpassed the Zacks Consensus Estimate of $7.58. The bottom line reflects a rise of 21% from the year-ago quarter.

Results were aided by revenue growth, along with higher AUM and assets under administration balances. However, an increase in expenses was a concern.

SEI Investments Co.’s (SEIC Quick QuoteSEIC - Free Report) third-quarter 2023 earnings of 87 cents per share met the Zacks Consensus Estimate. The bottom line reflects a rise of 93% from the prior-year quarter.

Results benefited from higher revenues and an increase in the AUM balance. Lower expenses acted as another tailwind.