Franklin Resources Inc.
) fiscal first quarter 2013 earnings reached $2.42 per share,
beating the Zacks Consensus Estimate by 4 cents. Moreover,
results outpaced earnings of $2.31 in the prior quarter.
Better-than-expected results came on the back of higher revenues.
Moreover, increased level of assets under management (AUM) was a
tailwind for the quarter. Yet, higher operating expenses were a
Net income was $516.1 million in the quarter compared with $492.1
million in the prior quarter.
Performance in Detail
Total operating revenue surged 5% sequentially to $1.90 billion,
due to growth in all revenue avenues. Revenue results were also
above the Zacks Consensus Estimate of $1.89 billion.
Investment management fees increased 5% sequentially to $1.2
billion, while sales and distribution fees inched up 4%
sequentially to $604 million. Moreover, shareholder servicing
fees surged 2% sequentially to $74.4 million, with other net
revenue increasing 15% sequentially to $23.4 million.
Total operating expenses increased 2% sequentially to $1.2
billion. The upsurge mainly resulted from higher sales,
distribution and marketing expenses and elevated compensation and
benefits. These increases were partially offset by lower general,
administrative and other expenses, reduced information systems
and technology expenses and low occupancy expenses.
As of Dec 31, 2012, total AUM was $781.8 billion, up from $749.9
billion as of Sep 30, 2012, driven by market appreciation of
$24.8 billion and $8.7 billion from an acquisition.
Simple monthly average AUM of $763.6 billion during the quarter
climbed 5% sequentially. Net new flows were $0.3 billion versus
$2.9 billion in the prior quarter.
Balance Sheet Position
As of Dec 31, 2012, cash and cash equivalents along with
investments were $7.6 billion compared with $8.4 billion as of
Sep 30, 2012. Moreover, total stockholders' equity was $9.5
billion versus $9.8 billion as of Sep 30, 2012.
During the reported quarter, Franklin repurchased 0.8 million
shares of its common stock for a total cost of $98 million.
Notably, during calendar year 2012, Franklin enhanced its
quarterly common stock dividend by 7% to 29 cents per share. The
increased dividend was paid on Dec 31 to shareholders of record
as of Dec 14, 2012.
Moreover, the company announced the payment of a special cash
dividend of 3 cents per share, which was paid on Dec 20 to
shareholders of record as of Dec 6, 2012.
The dividend increase is part of Franklin's long-term strategy to
enhance shareholder value through prudent capital management. The
strategy also includes investment in profitable businesses while
sustaining financial stability and flexibility.
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
the AUM growth and increase costs. Additionally, higher expenses
remain a matter of concern.
Shares of Franklin currently carry a Zacks Rank #3 (Hold). Among
Virtus Investment Partners, Inc.
) carries a Zacks Rank #1 (Strong Buy), while
) carry a Zacks Rank #2 (Buy).
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