Franklin Resources Inc. (BEN) declared preliminary assets under management (AUM) of $747.2 billion by its subsidiaries for the end of July 2011. Results were up 1.8% from $734.2 billion as of June 30, 2011 and 23.9% from $602.9 billion as of July 31, 2010.
Month-end total equity assets came in at $313.6 billion, up 1.2% sequentially and 23.7% year over year. Of the total equity assets, roughly 74% were from international sources, including acquisition of Balanced Equity Management of approximately $10.9 billion, while the remaining 26% were from the U.S.
Total fixed income assets were $312.7 billion, up 3.2% from $303.1 billion as of June 30, 2011 and 32.3% from $236.4 billion as of July 31, 2010. Of the total, tax-free assets accounted for only 22%, while the remaining 78% were taxable.
Franklin recorded $114.0 billion in hybrid assets, slightly down from $115.1 billion as of June 30, 2011 and up 7.0% from $106.5 billion as of July 31, 2010. Cash management funds as reported were $6.9 billion, up from $6.2 billion recorded in June 2011 and $6.5 billion as of July 2010.
On a quarterly basis, as of June 30, 2011, total AUM was $734.2 billion, up from $703.5 billion as of March 31, 2011 and from $570.5 billion as of June 30, 2010, driven by net new flows and market appreciation.
During the quarter, simple monthly average AUM inched up 6.0% sequentially and 25.0% year over year to $726.7 billion. At the end of the quarter, net new flows were $21.7 billion versus $8.4 billion in the prior quarter and $18.8 billion in the prior-year quarter.
Earnings Recap
Franklin’s fiscal third-quarter 2011 earnings of $2.26 per share outpaced the Zacks Consensus Estimate of $2.16. Results reflected strong growth in revenue and higher AUM, partially offset by increased operating expenses. Moreover, the results were ahead of earnings of $1.58 per share in the prior-year quarter and $2.25 per share in the prior quarter.
Our Take
Franklin's global footprint is an exceptionally favorable strategic point, since its AUM is well diversified. Moreover, a strong balance sheet coupled with the recently completed acquisitions is expected to strengthen the financials of the company going forward. However, the regulatory restrictions are anticipated to mar the AUM growth and increase its costs.
Currently, Franklin retains a Zacks #3 Rank, which translates to a short-term Hold rating. Besides, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the stock. Franklin’s peer – Invesco Ltd. (IVZ) also retains a Zacks #3 Rank.
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