Franklin Resources Inc. BEN reported fourth-quarter fiscal 2024 (ended Sept. 30) adjusted earnings of 59 cents per share, which missed the Zacks Consensus Estimate of 60 cents. Also, the bottom line decreased 29.7% from the prior-year quarter.
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BEN’s results were affected by a rise in its operating expenses. However, an increase in assets under management (AUM) balances, along with rising revenues, offered support.
Net loss was $84.7 million against a net income of $295.5 million recorded in the prior-year quarter. Our estimate for the metric was $165 million.
For fiscal 2024, adjusted earnings per share were $2.39 compared with the $2.60 recorded in the prior year.
Franklin’s Revenues & Expenses Rise
For fiscal 2024, total operating revenues increased 8% year over year to $8.48 billion. The figure beat the Zacks Consensus Estimate of $8.39 billion.
Total operating revenues increased 11.3% year over year to $2.21 billion in the fiscal fourth quarter. The rise was driven by an increase in investment management fees, sales and distribution fees and shareholder servicing fees. The reported figure also outpaced the Zacks Consensus Estimate of $2.12 billion.
Investment management fees rose 8.1% year over year to $1.77 billion. We projected the same to be $1.71 billion. Sales and distribution fees increased 20.1% to $368 million. We projected the metric to be $335.6 million. Shareholder-servicing fees jumped 80.1% on a year-over-year basis to $67 million. We projected the metric to be $50 million. Other revenues increased 23.5% to $10 million.
Total operating expenses rose 43.3% year over year to $2.36 billion. The rise was due to an increase in all the components of operating expenses. Our estimate for the metric was pegged at $1.89 billion.
Franklin reported an operating margin of negative 6.8% against the operating margin of 17% in the year-ago quarter.
Franklin’s AUM Rises
As of Sept. 30, 2024, total AUM was $1.69 trillion, up 1.9% sequentially. We projected the same to be $1.7 trillion.
Franklin’s long-term net outflows were $31.3 billion in the reported quarter.
Average AUM was $1.67 trillion, which increased 2.1% sequentially. We had projected an average AUM of $1.68 trillion.
Franklin’s Capital Position
As of Sept. 30, 2024, cash and cash equivalents, and investments were $5.6 billion, while total stockholders' equity was $13.3 billion.
In the reported quarter, Franklin repurchased 4.9 million shares for $102.4 million.
Our View on Franklin
Franklin’s efforts to diversify business through acquisitions, solid AUM balance and a strong distribution platform will aid its top line. However, a rising expense base due to the focus on technological upgrades is likely to hurt the bottom-line growth.
Franklin Resources, Inc. Price, Consensus and EPS Surprise
Franklin Resources, Inc. price-consensus-eps-surprise-chart | Franklin Resources, Inc. Quote
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
Lazard Inc.’s LAZ third-quarter 2024 adjusted earnings per share of 38 cents missed the Zacks Consensus Estimate of 41 cents. This compared favorably with earnings of 10 cents in the year-ago quarter.
LAZ’s results were negatively impacted due to a rise in expenses and weak performance in the corporate segment. Nonetheless, an increase in revenues in the financial advisory and asset management segment, along with a rise in AUM balances offered support.
Invesco’s IVZ third-quarter 2024 adjusted earnings of 44 cents per share came in line with the Zacks Consensus Estimate. The bottom line increased 25.7% from the prior-year quarter.
IVZ’s results were primarily aided by a decline in adjusted expenses and higher adjusted net revenues. An increase in the AUM balance on decent inflows was a positive too.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
