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Strong Equity Markets to Aid Franklin's (BEN) Q2 Earnings

Zacks Equity Research

Franklin Resources BEN is scheduled to report second-quarter fiscal 2019 results, before the opening bell on Apr 26. The company’s results are projected to reflect year-over-year fall in earnings and revenues.

Before we take a look at what our quantitative model predicts, let’s check how it performed in past quarters.

Franklin pulled off positive earnings surprises in two of the trailing four quarters and posted in-line results one.

However, in the last reported quarter, the company lagged the Zacks Consensus Estimate. Lower revenues and reduced assets under management (AUM) were recorded. Net outflows were also an undermining factor. However, controlled expenses were reflected in the quarter.

Franklin Resources, Inc. Price and EPS Surprise

Franklin Resources, Inc. Price and EPS Surprise | Franklin Resources, Inc. Quote

Earnings Whispers

Our proven model does not show that Franklin is likely to beat estimates this quarter. That’s because it doesn’t 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 0.00%.

Zacks Rank: Franklin has a Zacks Rank of 2 (Buy). This increases the predictive power of ESP but we need to have positive Earnings ESP to be sure of an earnings beat.

Activities of the company in the fiscal second quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 64 cents were revised upward over the last seven days. However, it indicates a fall of 18% from the year-ago reported figure.

Factors to Influence Q2 Results

Strong Markets to Lend Support: Performance of equity markets remained impressive during the fiscal second quarter, with the S&P 500 Index gaining nearly 13% sequentially. This is anticipated to support the California-based asset manager’s AUM growth.

Higher AUM: Per the Franklin’s monthly metrics disclosure, its AUM as of Mar 31, 2019, was $712.3 billion, up 9.6% from Dec 31, 2018 level on positive equity and fixed income market returns. Further, positive impact of the acquisition of Benefit Street Partners will also be reflected in the quarter’s results.

Revenues to Disappoint: Investment management fees, which mark a significant portion of the company’s revenues, might reflect a dip in the to-be-reported quarter. The consensus estimate for investment management fees of $960 million indicates nearly 14% decline from the year-ago reported figure. Furthermore, sales and distribution fees are projected to be down 16% to $344 million.

Overall, the Zacks Consensus Estimate for revenues of $1.41 billion indicates a fall of 12.9%.

Expenses Might Rise: Franklin’s investments in information systems and technology, rise in general, administrative and other expenses, which experience seasonality to some extent, are likely to impact results.

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 quarter.

Invesco Ltd IVZ is slated to release results on Apr 25. The company has an Earnings ESP of +1.15% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SVB Financial Group SIVB has an Earnings ESP of +0.42% and holds a Zacks Rank of 3, at present. It is slated to report results on Apr 25.

Affiliated Managers Group, Inc. AMG has an Earnings ESP of +0.46% and carries a Zacks Rank #2. It is expected to report quarterly numbers on Apr 29.

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SVB Financial Group (SIVB) : Free Stock Analysis Report
 
Invesco Ltd. (IVZ) : Free Stock Analysis Report
 
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Franklin Resources, Inc. (BEN) : Free Stock Analysis Report
 
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