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Franklin (BEN) Q4 Earnings Top Estimates, Revenues & AUM Dip
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Franklin Resources Inc. (BEN - Free Report) has reported fourth-quarter fiscal 2022 (ended Sep 30) adjusted earnings of 78 cents per share, which beat the Zacks Consensus Estimate of 69 cents. However, the bottom line declined 38% from the prior-year quarter.Our estimate for earnings was 85 cents.
While lower expenses alleviated the bottom-line pressure to some extent, BEN’s results display top-line weakness in the quarter, and underlined substantial drawdowns in both equities and fixed-income markets. A decline in assets under management (AUM) was another major drag.
Adjusted operating income was $494.1 million in the reported quarter compared with the prior-year quarter’s $647.1 million. Net income was $232.7 million, down 65% year over year.
For fiscal 2022, earnings per share were $3.63 compared with the $3.74 recorded in the prior year.
Revenues Fall on Low Investment Management Fees, Costs Dip
For fiscal 2022, total operating revenues fell 2% year over year to $8.27 billion. The revenue figure beat the Zacks Consensus Estimate of $8.22 billion.
Total operating revenues declined 11% year over year to $1.94 billion in the fiscal fourth quarter on lower investment management fees. Nonetheless, the reported figure outpaced the Zacks Consensus Estimate of $1.89 billion. We had projected operating revenues of $1.91 billion.
Investment management fees fell 8% year over year to $1.57 billion. We projected the same to be $1.52 billion. Sales and distribution fees were 24% down to $311 million. Shareholder-servicing fees declined 17% on a year-over-year basis to $46.2 million. Other revenues fell 8% to $10.8 million.
Total operating expenses were 4% down year over year to $1.59 billion.
Franklin has reported an operating margin of 18% compared with 24.4% in the year-ago quarter.
AUM Declines
As of Sep 30, 2022, the total AUM was $1.29 trillion, down 6% sequentially. Franklin’s net new outflows were $20.4 billion in the reported quarter.
Average AUM was $1.37 trillion, down 5% sequentially.
Capital Position
As of Sep 30, 2022, cash and cash equivalents, along with investments, were $5.8 billion, while the total stockholders' equity was $12.3 billion.
In the reported quarter, Franklin repurchased 1 million shares for $27.3 million.
Our Viewpoint
Franklin’s efforts to diversify its business into asset classes that are seeing growing client demand will likely propel AUM growth. Its acquisitions have expanded alternative investments and multi-asset solution platforms.
The company also announced the completion of the acquisition of BNY Alcentra Group Holdings, Inc. from The Bank of New York Mellon Corporation. With this, BEN expands its capabilities in the alternative asset strategies space and presence in Europe, nearly doubling its total AUM to $75 billion.
A challenging operating backdrop and several geopolitical concerns have significantly affected its AUM. Due to the focus on technological upgrades, costs may rise and weigh on bottom-line growth.
Franklin Resources, Inc. Price, Consensus and EPS Surprise
BlackRock, Inc.’s (BLK - Free Report) third-quarter 2022 adjusted earnings of $9.55 per share surpassed the Zacks Consensus Estimate of $7.93. The figure reflects a decrease of 15.8% from the year-ago quarter.
Results benefited from a decline in expenses. However, lower revenues and AUM balance were the major headwinds for BLK.
Invesco’s (IVZ - Free Report) third-quarter 2022 adjusted earnings of 34 cents per share missed the Zacks Consensus Estimate of 43 cents by a significant margin. The bottom line plunged 55.8% from the prior-year quarter. Our estimate for earnings was 49 cents.
Results have been adversely impacted by a lower AUM balance and long-term outflows, which hurt revenues. However, a decline in operating expenses was a tailwind for Invesco.
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Franklin (BEN) Q4 Earnings Top Estimates, Revenues & AUM Dip
Franklin Resources Inc. (BEN - Free Report) has reported fourth-quarter fiscal 2022 (ended Sep 30) adjusted earnings of 78 cents per share, which beat the Zacks Consensus Estimate of 69 cents. However, the bottom line declined 38% from the prior-year quarter.Our estimate for earnings was 85 cents.
While lower expenses alleviated the bottom-line pressure to some extent, BEN’s results display top-line weakness in the quarter, and underlined substantial drawdowns in both equities and fixed-income markets. A decline in assets under management (AUM) was another major drag.
Adjusted operating income was $494.1 million in the reported quarter compared with the prior-year quarter’s $647.1 million. Net income was $232.7 million, down 65% year over year.
For fiscal 2022, earnings per share were $3.63 compared with the $3.74 recorded in the prior year.
Revenues Fall on Low Investment Management Fees, Costs Dip
For fiscal 2022, total operating revenues fell 2% year over year to $8.27 billion. The revenue figure beat the Zacks Consensus Estimate of $8.22 billion.
Total operating revenues declined 11% year over year to $1.94 billion in the fiscal fourth quarter on lower investment management fees. Nonetheless, the reported figure outpaced the Zacks Consensus Estimate of $1.89 billion. We had projected operating revenues of $1.91 billion.
Investment management fees fell 8% year over year to $1.57 billion. We projected the same to be $1.52 billion. Sales and distribution fees were 24% down to $311 million. Shareholder-servicing fees declined 17% on a year-over-year basis to $46.2 million. Other revenues fell 8% to $10.8 million.
Total operating expenses were 4% down year over year to $1.59 billion.
Franklin has reported an operating margin of 18% compared with 24.4% in the year-ago quarter.
AUM Declines
As of Sep 30, 2022, the total AUM was $1.29 trillion, down 6% sequentially. Franklin’s net new outflows were $20.4 billion in the reported quarter.
Average AUM was $1.37 trillion, down 5% sequentially.
Capital Position
As of Sep 30, 2022, cash and cash equivalents, along with investments, were $5.8 billion, while the total stockholders' equity was $12.3 billion.
In the reported quarter, Franklin repurchased 1 million shares for $27.3 million.
Our Viewpoint
Franklin’s efforts to diversify its business into asset classes that are seeing growing client demand will likely propel AUM growth. Its acquisitions have expanded alternative investments and multi-asset solution platforms.
The company also announced the completion of the acquisition of BNY Alcentra Group Holdings, Inc. from The Bank of New York Mellon Corporation. With this, BEN expands its capabilities in the alternative asset strategies space and presence in Europe, nearly doubling its total AUM to $75 billion.
A challenging operating backdrop and several geopolitical concerns have significantly affected its AUM. Due to the focus on technological upgrades, costs may rise and weigh on bottom-line growth.
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 Asset Managers
BlackRock, Inc.’s (BLK - Free Report) third-quarter 2022 adjusted earnings of $9.55 per share surpassed the Zacks Consensus Estimate of $7.93. The figure reflects a decrease of 15.8% from the year-ago quarter.
Results benefited from a decline in expenses. However, lower revenues and AUM balance were the major headwinds for BLK.
Invesco’s (IVZ - Free Report) third-quarter 2022 adjusted earnings of 34 cents per share missed the Zacks Consensus Estimate of 43 cents by a significant margin. The bottom line plunged 55.8% from the prior-year quarter. Our estimate for earnings was 49 cents.
Results have been adversely impacted by a lower AUM balance and long-term outflows, which hurt revenues. However, a decline in operating expenses was a tailwind for Invesco.