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What to Expect From Franklin (BEN) This Earnings Season?

Franklin Resources, Inc. BEN is scheduled to report third-quarter fiscal 2020 results, before the opening bell, on Jul 30. The company’s results are projected to reflect a year-over-year decline in earnings.

In the last reported quarter, Franklin’s earnings surpassed the Zacks Consensus Estimate. The company’s results reflected prudent expense management. A strong capital position was another positive. However, net outflows and lower revenues were undermining factors.

In addition, Franklin recorded earnings beat in three of the trailing four quarters and a negative surprise in the other, the average beat being 12.88%.

Franklin Resources, Inc. Price and EPS Surprise

 

Franklin Resources, Inc. Price and EPS Surprise

Franklin Resources, Inc. price-eps-surprise | Franklin Resources, Inc. Quote

Nevertheless, the company’s activities in the fiscal third quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 53 cents increased over the last 30 days. However, the figure reflects a year-over-year plunge of 18.5%.

Earnings Whispers

Franklin does not have the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company has an Earnings ESP of 0.00%.

Zacks Rank: Franklin currently carries a Zacks Rank of 2 (Buy).

Factors at Play

Strong Markets: Performance of equity markets was decent during the June-end quarter despite lingering concerns due to the coronavirus pandemic. The S&P 500 Index gained 25.5% sequentially in the quarter. Moreover, the index measuring international equity performance — the MSCI EAFE — delivered net returns of 14.9% in the quarter under review. This might have supported the California-based asset manager’s performance to a large extent.

Lower AUM: Given Franklin’s AUM disclosure for March 2020 and favorable market returns, the company’s results are predicted to display higher assets under management on a sequential basis. Also, the company is expected to have recorded lower net outflows in the to-be-reported quarter.

Revenue to Decline: Investment management fees, which mark a significant portion of the company’s revenues, might have registered a decline in the fiscal third quarter. The consensus estimate for investment management fees of $833 million indicates an 8.3% sequential decrease. Furthermore, sales and distribution fees are projected to decline 11.7% sequentially to $302 million in the quarter.

Higher Expenses: Management expects to incur additional acquisition-related retention expenses of $40 million in the last two quarters of the current fiscal year (ending Sep 30, 2020). Additional termination benefit expenses of $4 million are expected for the remainder of the fiscal year primarily related to moving certain positions to lower cost jurisdictions and outsourcing fund administration services.

Stocks That Warrant a Look

Here are a few stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for Moody’s Corporation MCO is +2.14% and it carries a Zacks Rank of 3 at present. The company is slated to report second-quarter numbers on Jul 30. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UMB Financial Corporation UMBF is set to release earnings figures on Jul 28. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +33.72%.

Level One Bancorp LEVL is slated to report earnings figures on Aug 4. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +30.95%.

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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.

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