Franklin Resources, Inc.’s BEN shares have dropped 21.4% in the past year compared with the industry’s gain of around 13.4%, on rising investors’ concerns due to persistent net outflows recorded by the company.
Investment management fees have been Franklin’s biggest source of revenues, accounting for about 68%, for the past few years. Notably, during fiscals 2016 and 2017, fees declined due to reduction in average assets under management (AUM) and lower effective fee rate, which remain concerns.
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12-month period is 14.66% for Franklin as compared with the S&P 500 average of 16.56%. Thus, this investment manager reinvests its earnings inefficiently, which might drag it to a relatively disadvantageous position.
Further, Franklin has been witnessing downward revisions, of late. The Zacks Consensus Estimate for earnings of $3.17 for fiscal 2018 declined 2.8% over the last 60 days. For fiscal 2019, it moved down 6.8% to $3.28 during the same time frame. Notably, the company witnessed historical (3-5 years) earnings per share negative growth of 4.3% compared with nearly positive growth of 4% for the industry.
The stock currently carries a Zacks Rank #3 (Hold) with an unimpressive Momentum Score of C. Our research shows that stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. Hence, the stock does not look promising at present.
Picking Favorable Investment Management Stocks
While Franklin doesn’t appear to be an attractive pick right now, there are a few asset managers which have a better Zacks Rank and Momentum Score. Also, these companies have performed well as compared with the industry’s decline over the past six months.
With the help of the Zacks Stock Screener, we have zeroed in on three investment management stocks, with a Momentum Score of A or B and a Zacks Rank #1 or 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lazard Ltd LAZ carries a Zacks Rank of 2 and has a Momentum Score of A. Further, the Zacks Consensus Estimate for 2018 earnings has moved up 9%, over the last 60 days. Over the past year, the company’s shares have gained 15.6%.
Schroders plc SHNWF has a Zacks Rank #2 and Momentum Score of B. The Zacks Consensus Estimate for fiscal 2018 earnings has moved 1% north, in the past 60 days. Also, shares of the company on the NYSE have appreciated 7.7%, in a year's time.
Carrying a Zacks Rank #2 and a Momentum Score of A, Ashmore Group PLC’s AJMPF current fiscal's earnings estimate has remained unchanged, over the last 60 days. Further, over the past year, the stock has rallied 8.2% on the NYSE.
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