Franklin Resources Inc.
) fiscal second-quarter 2013 earnings reached $2.69 per share,
significantly beating the Zacks Consensus Estimate by 21 cents.
Moreover, results outpaced earnings of $2.42 in the prior
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Better-than-expected results came on the back of higher revenues.
Moreover, increased level of assets under management (AUM) and a
strong capital position were the tailwinds. Yet, higher operating
expenses were a dampener.
Net income was $572.8 million in the quarter compared with $516.1
million in the prior quarter.
Performance in Detail
Total operating revenue surged 6% sequentially to $2.01 billion,
due to growth in all revenue avenues. Revenue results were also
above the Zacks Consensus Estimate of $1.98 billion.
Investment management fees increased 6% sequentially to $1.3
billion, while sales and distribution fees inched up 6%
sequentially to $642.7 million. Moreover, shareholder servicing
fees surged 3% sequentially to $76.6 million, with other net
revenue increasing 15% sequentially to $26.8 million.
Total operating expenses increased 6% sequentially to $1.3
billion. The upsurge mainly resulted from higher sales,
distribution and marketing expenses, increased information
systems and technology expenses and elevated compensation and
benefits. These increases were partially mitigated by lower
general, administrative and other expenses and low occupancy
As of Mar 31, 2013, total AUM was $823.7 billion, up from $781.8
billion as of Dec 31, 2012, driven by market appreciation of
$24.5 billion and $18.3 billion of net new flows.
Simple monthly average AUM of $807.3 billion during the quarter
climbed 6% sequentially. Net new flows were $18.3 billion versus
$0.3 billion in the prior quarter.
As of Mar 31, 2013, cash and cash equivalents along with
investments were $8.0 billion compared with $7.6 billion as of
Dec 31, 2012. Moreover, total stockholders' equity was $10.1
billion versus $9.5 billion as of Dec 31, 2012.
During the reported quarter, Franklin repurchased 163,000 shares
of its common stock for a total cost of $23.3 million.
Franklin's global footprint is an exceptionally favorable
strategic point as its AUM is well diversified. The company is
also poised to benefit from its strong balance sheet. However,
regulatory restrictions and sluggish economic recovery could mar
AUM growth and increase costs. Additionally, higher expenses
remain a matter of concern.
Shares of Franklin currently carry a Zacks Rank #2 (Buy). Among
other investment managers,
Virtus Investment Partners, Inc.
Waddell & Reed Financial Inc.
) carry a Zacks Rank #1 (Strong Buy), while
) carries a Zacks Rank #2 (Buy).