Franklin Resources Inc. BEN, a renowned player in the financial market, is all set to unveil its first-quarter fiscal 2024 results, marking the conclusion of the period ending on Dec 31, 2023, just before the opening bell on Jan 29. Market analysts are projecting a decline in quarterly revenues compared to the previous year. However, there is a positive outlook for the earnings, expected to climb upwards.
During the last reported quarter, Franklin exceeded the Zacks Consensus Estimate for earnings buoyed by robust top-line performance when juxtaposed with the preceding quarter. Yet, the company grappled with mounting expenses that mildly impacted the bottom line. The dip in assets under management (AUM) was another significant setback.
Amid this volatility, Franklin managed to outperform the consensus estimate for earnings in three of the last four quarters, posting a mean surprise of 11.62%.
Fiscal Insight Snapshot
Fiscal Performance: Franklin Resources, Inc. Price, Consensus and EPS Surprise chart offers a visual representation of the company’s financial trajectory, providing investors with a snapshot of the recent market trend.
BEN’s activities in the upcoming quarter have managed to instill confidence among analysts. The Zacks Consensus Estimate for earnings per share for the first quarter of fiscal 2024 has surged by 1.8% over the past week to 56 cents. This figure suggests a striking 9.8% escalation from the analogous period last year.
Weighing in at $1.91 billion, the consensus estimate for revenues indicates a moderate decrease of 2.7%.
Market Dynamics
During the October-December period, the S&P 500 Index posted an 11.2% surge from levels at the end of September, signaling an encouraging performance in the equity market. Fixed-income markets also flourished, with the Bloomberg U.S. Aggregate Bond Index witnessing an uptick. Consequently, the asset managers are anticipated to reap the benefits of these robust market returns in the final quarter of the year.
As indicated by the monthly metrics data release by Franklin, the preliminary total AUM as of Dec 31, 2023, stood at $1.46 trillion, reflecting a noteworthy 5.9% surge from Sep 30, 2023. This boost in AUM is likely to have bolstered the company’s investment management fee. However, the Zacks Consensus Estimate for investment management fee stands at $1.49 billion, depicting a sequential decline of 8.8%. Our estimate for the same stands at $1.57 billion.
The consensus estimate for sales and distribution fees remains stagnant at $306 million from the preceding quarter’s reported figure. We estimate this metric to be $292 million.
The consensus estimate for shareholder servicing fees sits at $40.5 million, indicating a robust 9% increase. Further, the Zacks Consensus Estimate for other revenues stands at $9.7 million, suggesting an impressive surge of 19.5%. Our estimate for shareholder servicing fees and other revenues is pegged at $37.1 million and $9.8 million, respectively.
However, there are headwinds on the cost front. The company’s reliance on advanced technology has propelled costs upward. Additionally, Franklin is bracing for higher employee expenses fueled by the inflation-induced salary upticks.
Guidance for Q1 Fiscal 2024
The company anticipates compensation and benefits to hover around $750 million, inclusive of performance fees and accelerated deferred compensation charges of $35 million. It foresees performance fees to hover around $50 million. Information systems and technology expenses are predicted to remain flat at approximately $125 million sequentially. Occupancy expenses are likely to stand at $65 million. General, administrative, and other expenses are estimated to reach $140 million.
Earnings Whispers
Based on our proven model, there is a high likelihood of BEN exceeding the Zacks Consensus Estimate for earnings this time. This optimistic outlook stems from its favorable combination of a positive Earnings ESP and a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold).
Franklin’s Earnings ESP stands at a substantial +2.85%, and it currently holds a Zacks Rank of 1. For a comprehensive list of today’s Zacks #1 Rank stocks, you can visit the following link: the complete list of today’s Zacks #1 Rank stocks here.
Exploring Other Finance Stocks
If you’re looking to diversify your portfolio, here are a couple of other finance stocks worth considering, as our model indicates their potential to exceed earnings expectations in the upcoming period:
T. Rowe Price Group, Inc. (TROW): This company is on track to announce fourth-quarter and full-year 2023 results on Feb 8. It holds an Earnings ESP of +3.85% and currently flaunts a Zacks Rank #3. The Zacks Consensus Estimate for TROW’s quarterly earnings has seen a 6% uptick over the past 30 days, settling at $1.58 per share.
Principal Financial Group, Inc. (PFG): The Company is slated to release quarterly numbers on Feb 12. It currently carries a Zacks Rank #3 and boasts an Earnings ESP of +2.00%. Nonetheless, PFG’s quarterly earnings estimate has undergone a 1% downward revision to $1.70 over the past week.
To keep track of upcoming earnings announcements, you can refer to the Zacks Earnings Calendar.
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