Franklin Resources, Inc. BEN is scheduled to report first-quarter fiscal 2018 results, before the opening bell on Jan 30. Earnings are projected to decline year over year, while revenues might escalate.
Last quarter, Franklin outpaced the Zacks Consensus Estimate, driven by rise in revenues. Also, assets under management (AUM) growth remained strong.
Further, Franklin recorded positive earnings surprise in three of the trailing four quarters, with an average positive surprise of 7.31%.
Franklin Resources, Inc. Price and EPS Surprise
Franklin Resources, Inc. Price and EPS Surprise | Franklin Resources, Inc. Quote
Additionally, activities of the company in the fiscal first quarter encouraged analysts to revise estimates upward. As a result, the Zacks Consensus Estimate for earnings of 75 cents inched up nearly 1.4% over the last 30 days. However, the figure reflects year-over-year decline of 2.6%.
Why a Likely Positive Surprise?
Our proven model shows that Franklin is likely to beat on earnings in the fiscal first quarter. This is because the company has the combination of two key ingredients for a possible earnings beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold).
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Franklin is currently pegged at +0.98%.
Zacks Rank: The combination of Franklin’s Zacks Rank #2 and a positive ESP makes us confident of an earnings beat.
Factors to Influence Q1 Results
Strong Market Performance to Benefit Franklin: Performance of equity markets remained strong during the October-December quarter. The S&P 500 Index gained nearly 6.64% in the quarter. Moreover, the index measuring international equity performance — the MSCI EAFE — climbed around 4.23%. This is anticipated to benefit this California-based asset manager.
Higher AUM: Given Franklin’s AUM disclosure for December 2017 and equity market rally, the results are predicted to display higher AUM on a year-over-year basis. Additionally, the company is expected to record inflows mainly tied with Global Equity and U.S. Equity. Per the Zacks Consensus Estimate, total AUM for the to-be-reported quarter is expected to rise 5.1% to $757 million on a year-over-year basis.
Increase in Revenues: Investment management fees, which mark a significant portion of the company’s revenues, might improve on the back of market strength. The consensus estimate for investment management fees of $1.12 billion reflects nearly 5.7% growth year over year. Further, sales and distribution fees is projected to rise 2.9% year over year to $431 million in the quarter to be reported.
Overall, the Zacks Consensus Estimate for revenues of $1.62 billion indicates a year-over-year increase of 3.96%.
Controlled Expenses: Management remains focused on effective cost control. While potential investments in the technology front might escalate expenses in fiscal 2018, previous cost-cutting initiatives are likely to reflect optimism.
Stocks that Warrant a Look
Here are some 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.
T. Rowe Price Group TROW is scheduled to report fourth-quarter results on Jan 30. It has an Earnings ESP of +0.90% and a Zacks Rank #2. You can the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Apollo Global Management, LLC APO is +3.61% and it carries a Zacks Rank #2. The company is slated to release fourth-quarter numbers on Feb 1.
Eaton Vance Corp. EV has an Earnings ESP of +0.64% and a Zacks Rank #1. It is set to report results on Feb 28.
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