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Will Lower Market Volatility Hurt Franklin's (BEN) Q3 Earnings?
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Franklin Resources Inc. (BEN - Free Report) is scheduled to report third-quarter fiscal 2024 results (ended Jun 30) on Jul 26, before market open. While BEN’s quarterly earnings are anticipated to have declined from the year-ago reported level, revenues are expected to have risen.
In the last reported quarter, Franklin’s earnings missed the Zacks Consensus Estimate on higher expenses. However, an increase in assets under management (AUM) was a tailwind.
Franklin’s earnings beat the consensus estimate in three of the trailing four quarters and missed in one, the average earnings surprise being 14.3%.
BEN’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for earnings of 58 cents per share for third-quarter fiscal 2024 has moved marginally down in the past week. Also, the figure suggests a decline of 7.9% from the prior-year quarter’s actual.
The consensus estimate for revenues is pegged at $2.15 billion, indicating a year-over-year rise of 9.2%.
Factors at Play
In the April-June quarter, the S&P 500 Index rose more than 4%, indicating favorable equity-market performance. However, the fixed-income market could not catch up with the equity market. Hence, the June-end quarter’s performances of asset managers are expected to have been positively impacted by decent equity market returns, yet weak fixed-income market might have offset growth to some extent.
Per the monthly metrics data published by Franklin, its preliminary total AUM as of Jun 30, 2024, was $1.65 trillion, up marginally from Mar 31, 2024 tally. Driven by the improvement in the AUM balance, the company’s investment management fee is expected to have risen. The Zacks Consensus Estimate for AUM is pegged at $1.66 trillion, indicating growth of 20.9% from the prior-year quarter’s actual. Our estimate for the metric is pegged at $1.72 trillion.
Although volatility was lower in the fixed-income market, client activity remained decent on the back of investors seeking higher yields from different asset classes. Asset managers’ top line is expected to be adversely impacted to some extent because of lower performance fees and investment advisory fees, which constitute the majority of their revenues.
The Zacks Consensus Estimate for investment management fee is pegged at $1.65 billion, indicating a decline of 3.9% on a sequential basis. Our estimate for the same is pegged at $1.72 billion.
The consensus estimate for sales and distribution fees of $344.5 million indicates a 3.9% fall from the prior quarter’s reported figure. We estimate the metric to be $328.6 million.
The consensus estimate for shareholder servicing fees of $61.8 million suggests a 9% sequential decline. The Zacks Consensus Estimate for other revenues is pegged at $12.4 million, calling for a sequential decline of 1.3%. Our estimate for shareholder servicing fees and other revenues is pegged at $45.5 million and $11.4 million, respectively.
On the cost front, its initiatives to leverage ongoing technological advancements are likely to have led to cost upsurges. The acquisition of new talent is likely to keep the expense level high.
Q3 Guidance
The company expects compensation and benefits to be $820 million, including performance fees of $40 million.
Information systems and technology expenses are anticipated to be $150 million.
Occupancy expenses are projected to be $80 million.
General, administrative and other expenses are estimated to be $175-$180 million as the company plans to spend on advertising.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Franklin this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Franklin has an Earnings ESP of -3.13%.
Here are some other finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for Artisan Partners Asset Management Inc. (APAM - Free Report) is +1.73% and it carries a Zacks Rank #2 at present. The company is slated to report second-quarter 2024 results on Jul 23.
Over the past 30 days, the Zacks Consensus Estimate for APAM’s quarterly earnings has moved 1.2% north to 87 cents per share.
Hamilton Lane Incorporated (HLNE - Free Report) has an Earnings ESP of +2.14% and sports a Zacks Rank #1 at present. The company is scheduled to release first-quarter fiscal 2025 results on Aug 6.
HLNE’s quarterly earnings estimates have been revised nearly 1% upward to $1.09 over the past month.
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Will Lower Market Volatility Hurt Franklin's (BEN) Q3 Earnings?
Franklin Resources Inc. (BEN - Free Report) is scheduled to report third-quarter fiscal 2024 results (ended Jun 30) on Jul 26, before market open. While BEN’s quarterly earnings are anticipated to have declined from the year-ago reported level, revenues are expected to have risen.
In the last reported quarter, Franklin’s earnings missed the Zacks Consensus Estimate on higher expenses. However, an increase in assets under management (AUM) was a tailwind.
Franklin’s earnings beat the consensus estimate in three of the trailing four quarters and missed in one, the average earnings surprise being 14.3%.
Franklin Resources, Inc. Price and EPS Surprise
Franklin Resources, Inc. price-eps-surprise | Franklin Resources, Inc. Quote
BEN’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for earnings of 58 cents per share for third-quarter fiscal 2024 has moved marginally down in the past week. Also, the figure suggests a decline of 7.9% from the prior-year quarter’s actual.
The consensus estimate for revenues is pegged at $2.15 billion, indicating a year-over-year rise of 9.2%.
Factors at Play
In the April-June quarter, the S&P 500 Index rose more than 4%, indicating favorable equity-market performance. However, the fixed-income market could not catch up with the equity market. Hence, the June-end quarter’s performances of asset managers are expected to have been positively impacted by decent equity market returns, yet weak fixed-income market might have offset growth to some extent.
Per the monthly metrics data published by Franklin, its preliminary total AUM as of Jun 30, 2024, was $1.65 trillion, up marginally from Mar 31, 2024 tally. Driven by the improvement in the AUM balance, the company’s investment management fee is expected to have risen. The Zacks Consensus Estimate for AUM is pegged at $1.66 trillion, indicating growth of 20.9% from the prior-year quarter’s actual. Our estimate for the metric is pegged at $1.72 trillion.
Although volatility was lower in the fixed-income market, client activity remained decent on the back of investors seeking higher yields from different asset classes. Asset managers’ top line is expected to be adversely impacted to some extent because of lower performance fees and investment advisory fees, which constitute the majority of their revenues.
The Zacks Consensus Estimate for investment management fee is pegged at $1.65 billion, indicating a decline of 3.9% on a sequential basis. Our estimate for the same is pegged at $1.72 billion.
The consensus estimate for sales and distribution fees of $344.5 million indicates a 3.9% fall from the prior quarter’s reported figure. We estimate the metric to be $328.6 million.
The consensus estimate for shareholder servicing fees of $61.8 million suggests a 9% sequential decline. The Zacks Consensus Estimate for other revenues is pegged at $12.4 million, calling for a sequential decline of 1.3%. Our estimate for shareholder servicing fees and other revenues is pegged at $45.5 million and $11.4 million, respectively.
On the cost front, its initiatives to leverage ongoing technological advancements are likely to have led to cost upsurges. The acquisition of new talent is likely to keep the expense level high.
Q3 Guidance
The company expects compensation and benefits to be $820 million, including performance fees of $40 million.
Information systems and technology expenses are anticipated to be $150 million.
Occupancy expenses are projected to be $80 million.
General, administrative and other expenses are estimated to be $175-$180 million as the company plans to spend on advertising.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Franklin this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Franklin has an Earnings ESP of -3.13%.
Zacks Rank: BEN currently has a Zacks Rank of 4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.
Finance Stocks Worth a Look
Here are some other finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for Artisan Partners Asset Management Inc. (APAM - Free Report) is +1.73% and it carries a Zacks Rank #2 at present. The company is slated to report second-quarter 2024 results on Jul 23.
Over the past 30 days, the Zacks Consensus Estimate for APAM’s quarterly earnings has moved 1.2% north to 87 cents per share.
Hamilton Lane Incorporated (HLNE - Free Report) has an Earnings ESP of +2.14% and sports a Zacks Rank #1 at present. The company is scheduled to release first-quarter fiscal 2025 results on Aug 6.
HLNE’s quarterly earnings estimates have been revised nearly 1% upward to $1.09 over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.