On Jun 25, 2013, we reiterated our long-term recommendation on
Franklin Resources Inc.
) at Neutral based on its well-managed global franchise, strong
capital base and recent acquisitions. However, regulatory
restrictions and sluggish economic recovery could mar assets
under management (AUM) growth and increase costs. Additionally,
higher expenses remain a matter of concern.
Franklin is growing strategically and expanding its foothold.
Recently, the company announced the completion of the purchase of
the remaining 80% stake in Pelagos Capital Management, LLC, an
independent investment advisor. Such acquisitions will assist
Franklin in improving and expanding its alternative investments
and multi-asset solutions platforms, thereby helping provide
world-class investment solutions to its clients.
We view Franklin as a sound asset for yield-seeking investors.
The company exhibits a healthy positioning from a balance sheet
perspective. It has been able to generate positive cash flow even
in an increasingly difficult operating environment. Franklin
remains in compliance with the requirements for regulatory
ratios. Moreover, the company has hiked its dividend every year
since its inception in 1981.
Moreover, Franklin's fiscal second-quarter 2013 earnings reached
$2.69 per share, significantly beating the Zacks Consensus
Estimate by 21 cents. Additionally, results outpaced earnings of
$2.42 in the prior quarter. Better-than-expected results came on
the back of higher revenues. Moreover, increased level of AUM and
a strong capital position were the tailwinds.
However, at the current level, the asset management business is
under cyclical and secular pressures along with ongoing margin
pressures, many of which have been aggravated by the financial
crisis. These pressures include volatile markets and new
regulatory compliances. Though Franklin remains well positioned
over the long term, given short-term performance hindrances and
macro headwinds, a limited upside is expected in the near term.
For Franklin, the Zacks Consensus Estimate for fiscal 2013 jumped
2.1% to $10.36 per share, over the last 60 days. For 2014, the
Zacks Consensus Estimate advanced 1.7% to $11.60, over the same
time frame. Currently, Franklin carries a Zacks Rank #3 (Hold).
Investment Managers to be Consider
Some investment managers that are worth considering include
GAMCO Investors, Inc.
Virtus Investment Partners, Inc.
Noah Holdings Limited
). All 3 companies carry a Zacks Rank #1 (Strong Buy).
FRANKLIN RESOUR (BEN): Free Stock Analysis
GAMCO INVESTORS (GBL): Free Stock Analysis
NOAH HLDGS LTD (NOAH): Free Stock Analysis
VIRTUS INVESTMT (VRTS): Free Stock Analysis
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