Franklin Resources Inc. (BEN) reported preliminary assets under management (AUM) of $693.7 billion by its subsidiaries for the end of February. Results were up 1.9% from $681.0 billion as of January 31, 2011 and 24.7% from $556.3 billion as of February 28, 2010.
At the end of the month, total equity assets were $304.0 billion, up 1.0% sequentially and 23.0% year over year. Of the total equity assets, roughly 73% were from international sources while the remaining 27% were from the U.S.
Total fixed income assets were $270.2 billion, up 2.3% from $264.0 billion as of January 31, 2011, and 35.6% from $199.3 billion as of February 28, 2010. Of the total, tax-free assets accounted for only 25%, while the remaining 75% were taxable.
Franklinrecorded $112.0 billion in hybrid assets, up 2.9% from $108.8 billion as of January 31, 2011 and 8.2% from $103.5 billion as of February 28, 2010. Cash management funds as reported were $7.5 billion, up from $7.4 billion in January 2011 and $6.4 billion in February 2010.
Earnings Recap
Franklin reported first-quarter 2011 earnings of $2.23 per share, outpacing the Zacks Consensus Estimate of $1.91 per share. Results reflected strong growth in revenue and higher AUM, partially offset by increased operating expenses. Moreover, the results were ahead of the earnings of $1.54 per share in the prior-year quarter and $1.65 per share in the prior quarter.
As of December 31, 2010, Franklin reported AUM of $ 670.7 billion, up from $644.9 billion as of September 30, 2010 and $553.5 billion as of December 31, 2009, due to higher inflows. Net new flows were $3.2 billion versus $19.4 billion in the prior quarter and $14.3 billion in the prior-year quarter.
Competitors’ Performance
For the quarter ended December 2010, Franklin’s closest competitor BlackRock Inc. (BLK) reported AUM of $3.56 trillion, up from $3.35 trillion in the prior-year quarter, substantially surpassing Franklin’s AUM.
For another peer Invesco Ltd. (IVZ), long-term net inflows, positive market returns, and strengthening foreign currencies against the U.S. dollar improved AUM by 1.3% sequentially to $624.3 billion as of January 31, 2011.
Our Take
Franklin’s global footprint is an exceptionally favorable strategic point, since its AUM is well diversified. This coupled with a strong balance sheet is expected to cushion the company. However, Franklin is not immune to the volatile economic environment, which has been made worse by the costly regulatory matters following the Reform Act. The regulations could negatively affect the company’s AUM, increase costs and affect its results.
Franklin currently retains its Zacks #1 Rank, which translates to a short-term ‘Strong Buy’ rating. However, considering the fundamentals, we are maintaining a ‘Neutral’ recommendation on the stock for the long term.
FRANKLIN RESOUR (BEN): Free Stock Analysis Report
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INVESCO LTD (IVZ): Free Stock Analysis Report
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