Franklin Resources Inc. BEN reported second-quarter fiscal 2023 (ended Mar 31) adjusted earnings of 61 cents per share, which beat the Zacks Consensus Estimate of 57 cents. However, the bottom line declined 36% from the prior-year quarter. Our estimate for earnings was 55 cents.
While a rise in assets under management (AUM) was a tailwind, BEN’s results display top-line weakness in the quarter. Rising expenses affected the bottom line to some extent.
Net income attributable to BEN was $194.2 million, down 44% year over year. Our estimate for the metric was $163.5 million.
Revenues Fall, Costs Rise
Total operating revenues declined 7% year over year to $1.92 billion in the fiscal second quarter on lower investment management fees. Nonetheless, the reported figure outpaced the Zacks Consensus Estimate of $1.83 billion. We had projected operating revenues of $1.72 billion.
Investment management fees fell 5% year over year to $1.57 billion. We projected the same to be $1.39 billion. Sales and distribution fees were 19% down to $301.4 million. Shareholder-servicing fees declined 17% on a year-over-year basis to $43.3 million. Other revenues fell 2% to $9.2 million.
Total operating expenses were 3% up year over year to $1.67 billion. We projected the same to be $1.50 billion.
Franklin reported an operating margin of 13.2% compared with 22.2% in the year-ago quarter.
As of Mar 31, 2023, total AUM was $1.42 trillion, up 2% sequentially. Franklin’s long-term net flows were $3.7 billion in the reported quarter.
Average AUM was $1.41 trillion, up 5% sequentially.
As of Mar 31, 2023, cash and cash equivalents and investments were $5.8 billion, while total stockholders' equity was $12.4 billion.
In the reported quarter, Franklin repurchased 0.1 million shares for $3.6 million.
The company’s efforts to diversify its business into asset classes that are seeing growing client demand will likely propel AUM growth. Its acquisitions have expanded alternative investments and multi-asset solution platforms.
However, a challenging operating backdrop and several geopolitical concerns might significantly affect its AUM. Due to the focus on technological upgrades, costs may rise and weigh on bottom-line growth.
Franklin Resources, Inc. Price, Consensus and EPS Surprise
Currently, Franklin carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Asset Managers
BlackRock, Inc.’s BLK first-quarter 2023 adjusted earnings of $7.93 per share surpassed the Zacks Consensus Estimate of $7.71. However, the figure reflects a decrease of 16.7% from the year-ago quarter. Our estimate for adjusted earnings was $7.37.
BLK's results benefited from a decline in expenses. However, lower revenues and AUM balance were major headwinds.
SEI Investments Co.’s SEIC first-quarter 2023 earnings of 79 cents per share missed the Zacks Consensus Estimate of 82 cents. The bottom line reflects a decline of 41.9% from the prior-year quarter. Our estimate for earnings was 78 cents.
SEIC's results were adversely impacted by lower revenues. Also, marginally higher expenses created a headwind. Nevertheless, an increase in the AUM balance positively impacted the results in the quarter.
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