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Franklin (BEN) Rides on Strategic Buyouts, Higher Costs Ail
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Franklin Resources (BEN - Free Report) has been benefiting from strategic acquisitions and strong diversification efforts. These initiatives continue to aid assets under management (“AUM”) growth. However, rise in expenses and a strict regulatory environment remain near-term concerns.
Franklin’s organic growth through a strong distribution platform has increased diversification in flows across funds, vehicles and asset classes. The company’s early entrance in many foreign markets gives it a first mover's advantage. Growth prospects bode well since it continues to diversify business to expand its sources of revenues.
Also, Franklin continues to undertake inorganic growth strategies. In December 2021, it acquired O’Shaughnessy Asset Management, LLC, to enhance its presence in the separately managed account space. In November 2021, the company inked an agreement to acquire Lexington, which will complement its existing prowess in real estate, private credit and hedge fund strategies. Franklin also acquired Legg Mason in 2020. Such acquisitions are expected to support the company in improving and expanding its alternative investments and multi-asset solutions platforms.
Franklin’s AUM is witnessing a rising trend with a compounded annual growth rate (CAGR) of 19.4% over the last five fiscal years (ended 2021). Long-term net inflows were $24.1 billion in the first quarter of fiscal 2022 compared to long-term net outflows of $4.5 billion in the prior-year quarter. Moreover, the opportunistic buyouts, as well as investments in North Capital and CAIS, are likely to keep supporting AUM growth.
However, Franklin’s expenses witnessed a CAGR of 16.2% over the last four years (ended fiscal 2021). Despite recognizing cost synergies of $300 million from the Legg Mason acquisition, the metric saw a rise in the first three months of fiscal 2022. Leveraging on technological advancements might result in cost upsurges and weigh on the firm’s bottom-line expansion.
Moreover, the company is also subject to numerous regulations within the United States and outside that add further complexity to ongoing global compliance operations, and thereby, hurt profitability.
Currently, Franklin carries a Zacks Rank #3 (Hold). Over the past year, shares of the company have gained 9.3% against 7.4% decline recorded by the industry.
Over the past year, shares of FBIZ have jumped 41.3% whereas UBS and PCB stocks have rallied 7.9% and 54.5%, respectively.
Over the past 30 days, the Zacks Consensus Estimate for First Business’ current-year earnings has been revised 9% upward, while the same for UBS has moved 8.5% north. Moreover, current-year earnings estimates for PCB Bancorp have moved 10.3% up over the past month.
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Franklin (BEN) Rides on Strategic Buyouts, Higher Costs Ail
Franklin Resources (BEN - Free Report) has been benefiting from strategic acquisitions and strong diversification efforts. These initiatives continue to aid assets under management (“AUM”) growth. However, rise in expenses and a strict regulatory environment remain near-term concerns.
Franklin’s organic growth through a strong distribution platform has increased diversification in flows across funds, vehicles and asset classes. The company’s early entrance in many foreign markets gives it a first mover's advantage. Growth prospects bode well since it continues to diversify business to expand its sources of revenues.
Also, Franklin continues to undertake inorganic growth strategies. In December 2021, it acquired O’Shaughnessy Asset Management, LLC, to enhance its presence in the separately managed account space. In November 2021, the company inked an agreement to acquire Lexington, which will complement its existing prowess in real estate, private credit and hedge fund strategies. Franklin also acquired Legg Mason in 2020. Such acquisitions are expected to support the company in improving and expanding its alternative investments and multi-asset solutions platforms.
Franklin’s AUM is witnessing a rising trend with a compounded annual growth rate (CAGR) of 19.4% over the last five fiscal years (ended 2021). Long-term net inflows were $24.1 billion in the first quarter of fiscal 2022 compared to long-term net outflows of $4.5 billion in the prior-year quarter. Moreover, the opportunistic buyouts, as well as investments in North Capital and CAIS, are likely to keep supporting AUM growth.
However, Franklin’s expenses witnessed a CAGR of 16.2% over the last four years (ended fiscal 2021). Despite recognizing cost synergies of $300 million from the Legg Mason acquisition, the metric saw a rise in the first three months of fiscal 2022. Leveraging on technological advancements might result in cost upsurges and weigh on the firm’s bottom-line expansion.
Moreover, the company is also subject to numerous regulations within the United States and outside that add further complexity to ongoing global compliance operations, and thereby, hurt profitability.
Currently, Franklin carries a Zacks Rank #3 (Hold). Over the past year, shares of the company have gained 9.3% against 7.4% decline recorded by the industry.
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Stocks to Consider
Some better-ranked stocks in the banking space are First Business Financial Services (FBIZ - Free Report) , UBS Group AG (UBS - Free Report) and PCB Bancorp (PCB - Free Report) . At present, FBIZ sports a Zacks Rank #1 (Strong Buy), while UBS and PCB both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past year, shares of FBIZ have jumped 41.3% whereas UBS and PCB stocks have rallied 7.9% and 54.5%, respectively.
Over the past 30 days, the Zacks Consensus Estimate for First Business’ current-year earnings has been revised 9% upward, while the same for UBS has moved 8.5% north. Moreover, current-year earnings estimates for PCB Bancorp have moved 10.3% up over the past month.