It has been about a month since the last earnings report for Franklin Resources (BEN Quick QuoteBEN - Free Report) . Shares have added about 6.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Franklin Resources due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Franklin Q4 Earnings Miss on Higher Costs, AUM Rises Sequentially

Franklin Resources reported fourth-quarter fiscal 2024 (ended Sept. 30) adjusted earnings of 59 cents per share, which missed the Zacks Consensus Estimate of 60 cents. Also, the bottom line decreased 29.7% from the prior-year quarter.

BEN’s results were affected by a rise in its operating expenses. However, an increase in assets under management (AUM) balances, along with rising revenues, offered support.
 
Net loss was $84.7 million against a net income of $295.5 million recorded in the prior-year quarter.

For fiscal 2024, adjusted earnings per share were $2.39 compared with the $2.60 recorded in the prior year.

Franklin’s Revenues & Expenses Rise

For fiscal 2024, total operating revenues increased 8% year over year to $8.48 billion. The figure beat the Zacks Consensus Estimate of $8.39 billion.

Total operating revenues increased 11.3% year over year to $2.21 billion in the fiscal fourth quarter. The rise was driven by an increase in investment management fees, sales and distribution fees and shareholder servicing fees. The reported figure also outpaced the Zacks Consensus Estimate of $2.12 billion.

Investment management fees rose 8.1% year over year to $1.77 billion. We projected the same to be $1.71 billion. Sales and distribution fees increased 20.1% to $368 million. Shareholder-servicing fees jumped 80.1% on a year-over-year basis to $67 million. Other revenues increased 23.5% to $10 million.

Total operating expenses rose 43.3% year over year to $2.36 billion. The rise was due to an increase in all the components of operating expenses.

Franklin reported an operating margin of negative 6.8% against the operating margin of 17% in the year-ago quarter.

Franklin’s AUM Rises

As of Sept. 30, 2024, total AUM was $1.69 trillion, up 1.9% sequentially.

Franklin’s long-term net outflows were $31.3 billion in the reported quarter.

Average AUM was $1.67 trillion, which increased 2.1% sequentially.

Franklin’s Capital Position

As of Sept. 30, 2024, cash and cash equivalents, and investments were $5.6 billion, while total stockholders' equity was $13.3 billion.

In the reported quarter, Franklin repurchased 4.9 million shares for $102.4 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -10.57% due to these changes.

VGM Scores

Currently, Franklin Resources has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Franklin Resources has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Franklin Resources is part of the Zacks Financial - Investment Management industry. Over the past month, Principal Financial (PFG Quick QuotePFG - Free Report) , a stock from the same industry, has gained 2.7%. The company reported its results for the quarter ended September 2024 more than a month ago.

Principal Financial reported revenues of $3.67 billion in the last reported quarter, representing a year-over-year change of +5.6%. EPS of $1.76 for the same period compares with $1.72 a year ago.

For the current quarter, Principal Financial is expected to post earnings of $2 per share, indicating a change of +9.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.

Principal Financial has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.