We are upgrading our recommendation on Franklin Resources Inc. (BEN) to Outperform from Neutral based on the company’s first quarter 2011 earnings, which came in substantially ahead of the Zacks Consensus Estimate. Results reflected strong growth in revenue and higher assets under management (AUM).
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. Further, the latest acquisitions are expected to strengthen the financials of the company in the upcoming quarters.
Our six-month target price of $140.00 equates to about 16.8x our earnings estimate for 2011. We view $1.00 per share annual dividend as secure, implying an expected return of about 15.7% over that period. This is consistent with our Outperform recommendation on the shares.
FRANKLIN RESOUR (BEN): Free Stock Analysis Report
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