Franklin Resources Inc. BEN reported first-quarter fiscal 2025 (ended Dec. 31) adjusted earnings of 59 cents per share, which beat the Zacks Consensus Estimate of 53 cents. The bottom line compared unfavorably with 65 cents reported in the year-ago quarter.

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BEN’s results benefited from a rise in its revenues. However, lower assets under management balance, along with a rise in expenses, were spoilsports. 

Net income (GAAP basis) was $163.6 million, down 34.9% year over year. Our estimate for the metric was $171.9 million.

Franklin’s Revenues & Expenses Rise

Total operating revenues increased 13% year over year to $2.25 billion in the fiscal first quarter. The rise was driven by an increase in investment management fees, sales and distribution fees and shareholder servicing fees. The reported figure also outpaced the Zacks Consensus Estimate of $2.1 billion.

Investment management fees rose 9% year over year to $1.79 billion. We projected the same to be $1.7 billion. Sales and distribution fees increased 27% to $376 million. We projected the metric to be $343 million. Shareholder-servicing fees jumped 95% on a year-over-year basis to $64 million. We projected the metric to be $57 million. Other revenues increased 33% to $13.3 million.

Total operating expenses rose 14% year over year to $2.03 billion. The rise was due to an increase in all the components of operating expenses. Our estimate for the metric was pegged at $1.96 billion.

Franklin reported an operating margin of 9.7% compared with 10.4% in the year-ago quarter.

Franklin’s AUM Declines

As of Dec. 31, 2024, total AUM was $1.58 trillion, down 6% sequentially. We projected the same to be $1.64 trillion.

Franklin’s long-term net outflows were $50 billion in the reported quarter.

The average AUM was $1.63 trillion, which decreased 2% sequentially. We had projected an average AUM of $1.66 trillion.

Franklin’s Capital Position

As of Dec. 31, 2024, cash and cash equivalents, and investments were $5.2 billion, while total stockholders' equity was $13.2 billion.

Franklin’s Capital Distribution

In the reported quarter, Franklin repurchased 0.3 million shares for $5.8 million.

Our View on Franklin

Franklin’s efforts to diversify business through acquisitions and a strong distribution platform will aid its top line. However, a rising expense base due to the focus on technological upgrades is likely to hurt the bottom-line growth.

Franklin Resources, Inc. Price, Consensus and EPS Surprise

Franklin Resources, Inc. price-consensus-eps-surprise-chart | Franklin Resources, Inc. Quote

Currently, Franklin has a Zacks Rank #5 (Sell).
 
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Performance of Other Asset Managers

Invesco’s IVZ fourth-quarter 2024 adjusted earnings of 52 cents per share surpassed the Zacks Consensus Estimate of 49 cents. Moreover, the bottom line increased 10.6% from the prior-year quarter.

The results primarily gained from a decline in adjusted expenses and higher adjusted net revenues. An increase in AUM balance on decent inflows was a positive for IVZ.

BlackRock’s BLK fourth-quarter 2024 adjusted earnings of $11.93 per share surpassed the Zacks Consensus Estimate of $11.44. The figure reflects a rise of 23.5% from the year-ago quarter.

BLK’s results benefited from a rise in revenues. AUM witnessed robust growth and touched the $11.55 trillion mark driven by net inflows, partially offset by market depreciation and negative forex impact. However, higher expenses and lower non-operating income acted as headwinds.

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