Driven by higher revenues,
Franklin Resources Inc.
) fiscal first-quarter 2014 earnings reached 96 cents per share,
surpassing the Zacks Consensus Estimate by 3 cents. Moreover,
results outpaced the prior-year quarter earnings of 81 cents.
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Our proven model predicted that Franklin would beat earnings as
it had the right combination of two key ingredients - the
and Zacks Rank. It had a Zacks Rank #2 (Buy) and a positive
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 $603.8 million in the quarter compared with $516.1
million in the prior-year quarter.
Performance in Detail
Total operating revenue surged 11% year over year to $2.11
billion, due to growth in most revenue avenues. Revenue results
were also above the Zacks Consensus Estimate of $2.09 billion.
Investment management fees increased 14% year over year to $1.37
billion, while sales and distribution fees jumped 5% year over
year to $636.7 million. Moreover, shareholder servicing fees
inched up 2% on a year-over-year basis to $76.1 million, with
other net revenue declining 2% year over year to $22.9 million.
Total operating expenses increased 7% year over year 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 and general, administrative and other expenses.
As of Dec 31, 2013, total AUM was $879.1 billion, up from $781.8
billion as of Dec 31, 2012, driven by market appreciation of
$77.3 billion and $24.0 billion of net new flows. Simple monthly
average AUM of $865.9 billion during the quarter climbed 13% year
As of Dec 31, 2013, cash and cash equivalents along with
investments were $9.0 billion compared with $8.6 billion as of
Sep 30, 2013. Moreover, total stockholders' equity was $11.1
billion versus $10.7 billion as of Sep 30, 2013.
During the reported quarter, Franklin repurchased 2.5 million
shares of its common stock for a total cost of $137.1 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.
Among other investment managers,
Legg Mason Inc.
) is scheduled to report December quarter end results on Jan 31,
Ameriprise Financial, Inc.
) on Feb 4 and
) on Feb 5.