Franklin Resources Inc’s (BEN) first-quarter earnings of $1.54 per share were ahead of the Zacks Consensus Estimate of $1.47. Results were also ahead of the prior-year period’s earnings of 52 cents. The better-than-expected results reflected a greater inflow of cash in its funds.
Total operating revenues increased 42.0% year-over-year to $1.4 billion, primarily led by higher investment management fees, underwriting and distribution fees.
Total operating expenses increased 30.0% year-over-year to $910.4 million, mainly led by an increase in underwriting and distribution, higher compensation and benefits.
Total assets under management (AUM) by the company’s subsidiaries were $553.5 billion, compared to $416.2 billion last year. Simple monthly average AUM during the quarter was $534.9 billion as compared to $438.7 billion in the same quarter a year ago.
Franklin is healthy from a balance sheet perspective. The company has been able to generate positive cash flow even in an increasingly difficult operating environment. Cash and cash equivalents and investments were $5.4 billion, as compared to $5.8 billion at September 30, 2009.
The Investment Management and Related Services segment reported revenues of $1.4 billion, up 40.0% year-over-year, due to the increase in simple monthly average AUM and a higher effective investment management fee. Operating expenses increased 31.4% year-over-year to $871.0 million.
Operating revenues in the Banking/Finance segment increased to $12.7 million from negative $4.1 million in the prior-year quarter. Operating expenses increased 3.0% year-over-year to $39.1 million.
Global markets have continued to experience unprecedented volatility and a challenging business climate is forecast for the foreseeable future. Market conditions have resulted in a significant reduction in Franklin’s AUM, fee revenues and non-operating income, all of which decreased sharply during the past couple of years.
Though the company has improved its results of operations since the second half of 2009, we do not expect profitability to return in full swing until the economic recovery gathers momentum.
Read the full analyst report on “BEN”
Zacks Investment Research
