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Franklin (BEN) Q2 Earnings Top Estimates, Revenues Rise Y/Y

·4 min read

Franklin Resources Inc. BEN has reported second-quarter fiscal 2022 (ended Mar 31) adjusted earnings of 96 cents per share, which beat the Zacks Consensus Estimate of 79 cents. The bottom line also improved 22% from the prior-year quarter.

BEN’s results display top-line strength in the quarter. Also, lower expenses were positives. However, a decline in assets under management (AUM) was a major drag.

Adjusted operating income was $576.6 million in the reported quarter compared with the prior-year quarter’s $581.1 million.

Net income was $349.6 million, down 8% year over year.

Revenues Rise, Costs Dip

Total operating revenues rose marginally year over year to $2.08 billion in the fiscal second quarter on higher investment management fees. The reported figure also outpaced the Zacks Consensus Estimate of $2.03 billion.

Investment management fees climbed 3% year over year to $1.65 billion, while other revenues jumped 7% to $9.4 million. Sales and distribution fees were 10% down to $370.2 million. Shareholder-servicing fees declined 6% on a year-over-year basis to $52.2 million.

Total operating expenses were marginally down year over year to $1.61 billion.

Franklin has reported an adjusted operating margin of 35.7% compared with 38% in the year-ago quarter.

AUM Declines

As of Mar 31, 2022, the total AUM was $1.47 trillion, down 6% from $1.57 trillion as of Dec 31, 2021. Franklin recorded net new outflows of $11.7 billion in the reported quarter.

Average AUM was recorded at $1.51 trillion, down 2% sequentially.

Capital Position Mixed

As of Mar 31, 2022, 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 2.7 million shares for $80.8 million.

Our Viewpoint

Franklin’s global footprint is an exceptionally favorable strategic point, as its AUM is well-diversified. Last month, BEN completed its previously announced acquisition of Lexington, a leading global manager of secondary private equity and co-investment funds, 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 #4 (Sell).

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

Performance of Other Finance Stocks

BlackRock, Inc.’s BLK first-quarter 2022 adjusted earnings of $9.52 per share outpaced the Zacks Consensus Estimate of $8.92. The figure reflects a rise of 18.4% from the year-ago quarter.

BLK’s results benefited from an improvement in revenues, partly offset by higher expenses. Moreover, long-term net inflows supported growth in the AUM balance.

Invesco’s IVZ first-quarter 2022 adjusted earnings of 56 cents per share missed the Zacks Consensus Estimate of 61 cents. The bottom line declined 17.6% from the prior-year quarter.

Results were adversely impacted by a rise in operating expenses. However, improvement in revenues and solid growth in the AUM balance acted as tailwinds.

SEI Investments Co.’s SEIC first-quarter 2022 earnings of $1.36 per share were in line with the Zacks Consensus Estimate. The bottom line reflects a 53% jump from the prior-year quarter. The reported quarter comprised a one-time early termination fee of $88 million or 47 cents per share, which was included in information processing and software servicing fees.

SEIC’s results were aided by revenue growth and an increase in the AUM balance. These were offset by a rise in expenses.

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