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Franklin (BEN) Q1 Earnings Top Estimates, Revenues & AUM Rise

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Franklin Resources Inc. BEN reported first-quarter fiscal 2021 (ended Dec 31) adjusted earnings of $1.08 per share, which beat the Zacks Consensus Estimate of 88 cents. The bottom line also improved 48% from earnings of 73 cents per share recorded in the prior-year quarter.

BEN’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 were a major drag.

Adjusted operating income was $685.9 million in the reported quarter compared with the prior-year quarter’s $549.9 million.

Net income was $453.2 million or 88 cents per share compared with $438.4 million or 86 cents per share recorded in the prior-year quarter.

Revenues Rise, Costs Escalate

Total operating revenues rose 11% year over year to $2.22 billion in the fiscal first quarter on higher investment management, sales and distribution and other revenues. The reported figure also outpaced the Zacks Consensus Estimate of $2.19 billion.

Investment management fees climbed 14% year over year to $1.76 billion, while other revenues jumped 110% to $17.6 million. Sales and distribution fees were up marginally to $398.2 million. Shareholder-servicing fees declined 33% on a year-over-year basis to $47.7 million.

Total operating expenses flared up 5% year over year to $1.67 billion, stemming from a rise in all components of expenses, except general, administrative and other.

Franklin reported an operating margin of 25.1% compared with 20.5% in the year-ago quarter.

AUM Higher

As of Dec 31, 2021, the total AUM was $1.58 trillion, up 5% from $622.8 billion as of Dec 31, 2020. Franklin recorded net new outflows of $24.1 billion in the October-December months.

Average AUM was recorded at $1.55 trillion, flat sequentially and up 8% on a year-over-year basis.

Capital Position Mixed

As of Dec 31, 2021, cash and cash equivalents along with investments were $5.8 billion compared with $5.9 billion as of Sep 30, 2021. Nonetheless, total stockholders' equity was $12.2 billion compared with $11.8 billion as of Sep 30, 2021.

In the reported quarter, Franklin repurchased 0.7 million shares for $21.7 million.

Our Viewpoint

Franklin’s global footprint is an exceptionally favorable strategic point, as its AUM is well-diversified. During the quarter, BEN completed its previously announced acquisition of O’Shaughnessy Asset Management, a preeminent quantitative asset management firm, thereby reinforcing its position in the separately managed account space. It had also signed an agreement to acquire Lexington, a domineering secondary private equity and co-investment funds’ global manager, to fortify its alternative asset competencies. 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 and EPS Surprise
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.

Performance of Other Finance Stocks

First Republic Bank’s FRC fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by a higher net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup Inc. C delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting and growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

U.S. Bancorp USB reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.

Though lower revenues and escalating expenses were disappointing factors, credit quality was a tailwind. Growth in loan and deposit balance and a strong capital position were also encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.


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