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Franklin (BEN) Q3 Earnings Top Estimates, Revenues & AUM Rise

Franklin Resources Inc. BEN has reported third-quarter fiscal 2021 (ended Jun 30) adjusted earnings of 96 cents per share, which beat the Zacks Consensus Estimate of 76 cents. The bottom line also improved 37% from earnings of 70 cents per share recorded in the prior-year quarter.

The company’s results display top-line strength in the quarter. Also, a solid capital position and higher assets under management (AUM) were positives. However, higher expenses and net outflows were major drags.

Adjusted operating income was $601.2 million in the reported quarter compared with the prior-year quarter’s $270.8 million.

Net income was $438.4 million or 86 cents per share compared with $290.4 million or 58 cents per share recorded in the prior-year quarter.

Revenues Rise, Partly Offset by Elevated Costs

Total operating revenues jumped 87% year over year to $2.17 billion in the fiscal third quarter on higher investment management, sales and distribution, shareholder-servicing fees and other revenues. The reported figure also outpaced the Zacks Consensus Estimate of $2.13 billion.

Investment management fees surged 110% year over year to $1.7 billion, while other revenues increased 58% to $8.2 million. Sales and distribution fees were up 38% to $416.9 million. Shareholder-servicing fees climbed 13% on a year-over-year basis to $50.5 million.

Total operating expenses flared up 83% year over year to $1.69 billion. The upsurge resulted from a rise in all components of expenses, including compensation and benefits, information systems and technology, general, administrative and other, and sales, distribution and marketing expenses.

The company reported an operating margin of 22% compared with 20% in the year-ago quarter.

AUM Higher

As of Jun 30, 2021, the total AUM was $1.55 trillion, up 149% from $622.8 billion as of Jun 30, 2020. Notably, the company recorded net new outflows of $6.6 billion in the April-June period.

Simple monthly average AUM of $1.53 trillion increased 2% sequentially and 153% on a year-over-year basis.

Capital Position Improves

As of Jun 30, 2021, cash and cash equivalents along with investments were $5.5 billion compared with $4.3 billion as of Sep 30, 2020. Total stockholders' equity was $11.4 billion compared with $10.9 billion as of Sep 30, 2020.

In the reported quarter, the company repurchased 1.4 million shares for $46.4 million.

Our Viewpoint

The company’s global footprint is an exceptionally favorable strategic point, as its AUM is well-diversified. Although growth in investment-management fees and strategic moves will likely support AUM growth, a rise in expenses might restrict bottom-line expansion in the upcoming period.

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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

Affiliated Managers Group Inc.’s AMG second-quarter 2021 economic earnings of $4.03 per share surpassed the Zacks Consensus Estimate of $3.82. The bottom line grew 47.1% year over year.

Lazard Ltd LAZ reported second-quarter 2021 adjusted earnings of $1.28 per share, beating the Zacks Consensus Estimate of 89 cents. The reported figure also reflected 91% year-over-year growth.

Ameriprise Financial’s AMP second-quarter 2021 adjusted operating earnings per share of $5.27 surpassed the Zacks Consensus Estimate of $5.23. The bottom line reflected a rise of 39.4% from the year-ago quarter. Notably, the prior-year quarter figure excluded net operating loss tax impacts.

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