On Nov 30, we issued an updated research report on Franklin Resources BEN. The company has been benefiting from expense management and strong diversification strategies. However, declining investment management fees and strict regulatory environment remain the near-term concerns for this Zacks Rank #3 (Hold) stock.
The company’s earnings estimates for fiscal 2017 have been revised marginally upward in the last 60 days.
Franklin’s shares have gained 10.5% in a year’s time, underperforming the industry’s rally of 29.2%.
The company remains focused on cost control. Franklin recorded 7%, 14% and 3% decline in operating expenses in fiscal 2015, 2016 and 2017, respectively. While potential investments in the technology may escalate expenses in fiscal 2018, previous cost-cutting initiatives are expected to support the top line.
Also, Franklin has grown through strategic acquisitions in the last couple of years. Such acquisitions will support the company in improving and expanding its alternative investments and multi-asset solutions platforms, which in turn are likely to help it provide world-class investment solutions to clients.
However, the company’s AUM is exposed to market fluctuations and foreign exchange translations, regulatory changes or a sudden slowdown in overall business activities. Notably, during fiscals 2016 and 2017, fees declined due to reduced average AUM and lower effective fee rate.
Further, the business and regulatory environment in which Franklin operates continues to be complex and uncertain. Additionally, it remains subject to numerous regulations by U.S. and non-U.S. regulators that further increases complexity to ongoing global compliance operations and thereby hurt profitability.
Some better-ranked stocks in the same space include AllianceBernstein Holding L.P. AB, Hamilton Lane Incorporated HLNE and Waddell & Reed Financial WDR. All these stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AllianceBernstein Holding has witnessed an upward earnings estimate revision of one cent per share for the current year, in the last 60 days. Also, its shares have gained 6.6% year to date.
Hamilton Lane Incorporated’s current-year earnings estimates have been revised upward by 6.5%, in the last 60 days. Also, on a year-to-date basis, its shares have surged 91.3%.
Waddell & Reed Financial has witnessed an upward earnings estimate revision of 5.6% for the current year, in the last 60 days. The company’s shares have gained 4.1% year to date.
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