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Franklin Resources (BEN) Up 5.5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Franklin Resources (BEN - Free Report) . Shares have added about 5.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Franklin Resources due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Franklin Q3 Earnings Top Estimates, Revenues & AUM Rise
Franklin 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 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.
Outlook
The company remains on track to realize $300 million of gross synergies, with 85% of run rate savings expected to be realized by the end of fiscal year 2021. The company anticipates to realize $150 million each in expense reductions related to merger in fiscal 2021 and 2022, respectively.
Normalized tax rate for fourth-quarter fiscal 2021 is expected to be 24-25%.
Franklin expects to redeem the Legg Mason 5.45% notes with a face value of $500 million in September, generating $19 million in net annual interest expense savings. For fiscal 2021, adjusted expenses are expected to be $3.875-$3.925 billion.
Management project performance fees of $10 million per quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, Franklin Resources has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Franklin Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Franklin Resources (BEN) Up 5.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Franklin Resources (BEN - Free Report) . Shares have added about 5.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Franklin Resources due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Franklin Q3 Earnings Top Estimates, Revenues & AUM Rise
Franklin 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 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.
Outlook
The company remains on track to realize $300 million of gross synergies, with 85% of run rate savings expected to be realized by the end of fiscal year 2021. The company anticipates to realize $150 million each in expense reductions related to merger in fiscal 2021 and 2022, respectively.
Normalized tax rate for fourth-quarter fiscal 2021 is expected to be 24-25%.
Franklin expects to redeem the Legg Mason 5.45% notes with a face value of $500 million in September, generating $19 million in net annual interest expense savings. For fiscal 2021, adjusted expenses are expected to be $3.875-$3.925 billion.
Management project performance fees of $10 million per quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, Franklin Resources has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Franklin Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.