Impacted by lower top line, Franklin Resources Inc.’s (BEN) fiscal first-quarter 2015 earnings of 91 cents per share missed the Zacks Consensus Estimate by 2 cents. Moreover, results compared unfavorably with the prior-year quarter earnings of 96 cents per share.
Lower-than-expected results were impacted by a decline in revenues. Moreover, net outflows were a headwind. However, decreased expenses reflect prudent expense management.
Net income was $566.4 million in the quarter compared with $603.8 million in the prior-year quarter.
Performance in Detail
Total operating revenue decreased 2% year over year to $2.06 billion in the quarter, mainly due to lower shareholder servicing fees. Moreover, revenues lagged the Zacks Consensus Estimate of $2.12 billion.
Investment management fees increased 1% year over year to $1.38 billion, while sales and distribution fees declined 7% year over year to $595 million. Moreover, other net revenue decreased 8% year over year to $21.1 million, while shareholder servicing fees descended 14% on a year-over-year basis to $65.8 million.
Total operating expenses decreased 1% year over year to $1.28 billion. The fall resulted mainly from decline in sales, distribution and marketing expenses.
As of Dec 31, 2014, total AUM was $880.1 billion, modestly up from $879.1 billion as of Dec 31, 2013. Notably, the quarter recorded net new outflows of $3.5 billion. Simple monthly average AUM of $894.1 billion climbed 3% year over year.
Capital Position
As of Dec 31, 2014, cash and cash equivalents along with investments were $10.4 billion compared with $10 billion as of Sep 30, 2014. Moreover, total stockholders' equity was $12.2 billion, in line with the prior quarter.
During the reported quarter, Franklin repurchased 2.7 million shares of its common stock at a total cost of $151.2 million.
Our Viewpoint
Franklin's global footprint is an exceptionally favorable strategic point as its AUM is well diversified. Moreover, the company’s capital deployment activities are also encouraging.
Though regulatory restrictions and sluggish economic recovery could mar AUM growth and increase costs, the company is poised to benefit from its strong balance sheet. However, lower revenues remain a concern.
Currently, Franklin carries a Zacks Rank #3 (Hold).
Competitive Landscape
SEI Investments Co. (SEIC) reported fourth-quarter 2014 (ended Dec 31) adjusted earnings per share of 51 cents beating the Zacks Consensus Estimate of 48 cents. Moreover, the reported figure was up 38% from the year-ago quarter. The current quarter earnings were adjusted for a one-time after-tax charge associated with the write down of an equity investment.
Janus Capital Group, Inc. (JNS) reported fourth-quarter earnings per share attributable to common shareholders of 24 cents, beating the Zacks Consensus Estimate by 4 cents. Moreover, results compared favorably with the prior-year quarter earnings of 21 cents. Better-than-expected results reflected top-line growth and increased AUM aided by net inflows, depicting stability in earnings. However, rise in operating expenses were headwinds for the quarter.
Driven by strong top-line performance, T. Rowe Price Group, Inc. (TROW) reported impressive fourth-quarter 2014 results with a positive earnings surprise of 4.4%. The company reported net income of $1.18 per share, beating the Zacks Consensus Estimate by 5 cents. Moreover, this compared favorably with the year-ago earnings of $1.06 per share. Elevated operating expenses remain a concern. However, top-line growth and improved AUM were the positives.
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