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Franklin Resources Inc. (BEN): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

By: Zacks.com
Posted: 12/17/2013 7:00:00 AM
Referenced Stocks: BEN

Summary:
Franklin's fiscal fourth-quarter 2014 earnings outpaced the Zacks Consensus Estimate. Moreover, it came above the prior-year quarter earnings. Results were driven by improved top line, a healthy capital position and increased level of assets under management (AUM). We believe 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 acquisitions in the last couple of years, efficient capital deployment activities and a strong balance sheet. However, regulatory restrictions, expanding cost base and a sluggish economic recovery could mar AUM growth and increase costs.

Overview:

Franklin Resources Inc. (BEN), headquartered in San Mateo, CA, is a global investment management company. The majority of its operating revenue and net income is derived from investment advisory and related services to retail mutual funds, institutional and private accounts and other investment products. Related services include transfer agency, fund administration, custodial, trustee and fiduciary services. The mutual funds and other products are sold to the public under seven brands: Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2. Notably, in Sep 2014, Franklin deregistered as a bank holding company with the Board of Governors of the Federal Reserve System.

Franklin's principal line of business provides investment advisory and management services. Fund shares are offered to individual investors, qualified groups, trustees, tax-deferred (such as IRA) or money purchase plans, employee benefit and profit-sharing plans, trust companies, bank trust departments and institutional investors.

Apart from the domestic market, Franklin's global presence includes Europe, Middle East, Africa, Asia-Pacific, Canada and Latin America. As of Sep 30, 2014, Franklin had around 9,300 employees and operated offices in 35 countries with $898 billion in AUM.

Effective Jul 1, 2012, Franklin has one operating segment - Investment management and related services.

In Jul 2013, a three-for-one split of common stock was distributed to common stockholders in the form of a stock dividend.

In Jun 2013, Franklin completed the purchase of the remaining 80% stake in Pelagos Capital Management, LLC, an independent investment advisor. Franklin had previously purchased 20% stake in Pelagos in 2010. On Nov 1, 2012, Franklin acquired approximately 69% of the equity of K2 Advisors Holdings LLC, a fund of hedge funds solutions provider. The purchase consideration included a $182.9 million cash investment in K2, which was primarily used to retire $176.5 million of debt immediately following the acquisition. The company also agreed to acquire K2's remaining equity interests over a multi-year period beginning fiscal year 2017, resulting in the conversion of this equity to a liability.

In Jul 2011, Franklin acquired all the outstanding shares of a specialist Australian equity manager Balanced Equity Management Pty. Limited (BEM) for a purchase consideration of $64.1 million in cash and common stock. In Jan 2011, Franklin acquired all of the outstanding shares of Rensburg Fund Management Limited (Rensburg), a specialist UK equity manager, for a purchase consideration of $72.4 million in cash.


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