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Will Strong Equity Markets Aid Franklin's (BEN) Q1 Earnings?

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Franklin Resources (BEN - Free Report) is scheduled to report first-quarter fiscal 2020 results, before the opening bell on Jan 30. The company is likely to have recorded year-over-year growth in earnings and revenues.

The company’s activities in the fiscal first quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 67 cents remained unchanged over the last seven days. Nevertheless, the figure indicates rise of 24.1% from the year-ago reported number.

Also, the Zacks Consensus Estimate for revenues of $1.43 billion indicates a year-over-year growth of 1.6%.

Franklin Resources, Inc. Price and EPS Surprise

Factors at Play

Strong Markets: Performance of equity markets was impressive during the October-December quarter. The S&P 500 Index rallied 9.9% in the quarter. Moreover, the index measuring international equity performance — the MSCI EAFE — delivered net returns of 8.2% in the fourth quarter. This might have driven the California-based asset manager’s performance to a large extent.

Higher AUM: Franklin’s AUM disclosure for December 2019 reflects nearly 1% growth from Sep 30, 2019 level. Favorable foreign-currency fluctuations are expected to have been partially offset by net outflows mainly tied with U.S. and non-U.S. mutual funds.

Revenue Growth: Investment management fees, which mark a significant portion of the company’s revenues, might have recorded growth in the fiscal first quarter. The consensus estimate for investment management fees of $997 million indicates 2.6% increase from the year-ago reported number. Furthermore, the consensus mark for sales and distribution fees of $366 million suggests 3.1% rise, and the same for shareholder servicing fees of $58 million indicates 5.5% growth.

Controlled Expenses: Expense reduction, which has long been the main strategy to remain profitable, might have been a major support in the quarter. Franklin’s cost-saving initiatives are likely to have offset the negative impact of investments in technology.

Earnings Whispers

Franklin does not have the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase 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: The company has an Earnings ESP of -0.25%.

Zacks Rank: Franklin currently has a Zacks Rank of 3.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this time around.

WisdomTree Investments is slated to release results on Jan 31. The company has an Earnings ESP of +5.88% and carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Affiliated Managers Group, Inc. (AMG - Free Report) has an Earnings ESP of +3.89% and holds a Zacks Rank of 3. It is scheduled to report December-ended results on Feb 3.

Cullen/Frost Bankers, Inc. (CFR - Free Report) is set to release earnings on Jan 30. The company has an Earnings ESP of +0.18% and currently carries a Zacks Rank of 3.

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