On Sep 24, 2013, we maintained 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.
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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 has hiked its dividend every year since its inception
in 1981. Notably, in Sep 2013, Franklin enhanced its quarterly
common stock dividend by 3% over the prior quarter to 10 cents
per share. The dividend will be paid on Oct 11 to shareholders of
record as of Sep 30, 2013.
Moreover, Franklin's fiscal third-quarter 2013 earnings reached
86 cents per share, beating the Zacks Consensus Estimate by a
penny. Moreover, results outpaced earnings of 71 cents in the
prior-year quarter. Notably, during the quarter, Franklin
announced a 3-for-1 stock split, which was paid as stock dividend
on Jul 25, 2013 to common stockholders of record as of Jul 12,
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
remained stable at $3.42 per share, over the last 60 days. For
2014, the Zacks Consensus Estimate declined 1.1% to $3.67, over
the same time frame. Hence, Franklin carries a Zacks Rank #3
Investment Managers to be Consider
Some investment managers that are worth considering include
GAMCO Investors, Inc.
) with a Zacks Rank #1 (Strong Buy), while
Affiliated Managers Group Inc.
Noah Holdings Limited
) carry a Zacks Rank #2 (Buy).