Franklin Resources Inc.'s (BEN) second quarter 2011 earnings of $2.25 per share outpaced the Zacks Consensus Estimate of $2.00 per share. Results reflected robust growth in revenue and higher assets under management (AUM), partially offset by increased operating expenses. Moreover, the results were ahead of earnings of $1.55 per share in the prior-year quarter and $2.23 per share in the prior quarter.
Franklin's global footprint is an exceptionally favorable strategic point, since its AUM is well diversified. This, coupled with a strong balance sheet and completion of recent acquisitions, is expected to cushion the company. However, regulatory restrictions could negatively impact the company's AUM and increase its costs.
Our six-month target price of $153.00 equates to about 17.4x our earnings estimate for 2011. We view $1.00 per share annual dividend as secure, implying an expected return of about 20.6% over that period. This is consistent with our Outperform recommendation on the shares.
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