Franklin Resources Inc. (BEN) reported preliminary assets under management (AUM) of $703.5 billion by its subsidiaries for the end of March. Results were up 1.4% from $693.7 billion as of February 28, 2011 and 19.9% from $586.8 billion as of March 31, 2010.
At March end, total equity assets were $308.9 billion, up 1.6% sequentially and 17.5% 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 $275.2 billion, up 1.9% from $270.2 billion as of February 28, 2011, and 30.6% from $210.7 billion as of March 31, 2010. Of the total, tax-free assets accounted for only 25%, while the remaining 75% were taxable.
Franklin recorded $113.4 billion in hybrid assets, up 1.3% from $112.0 billion as of February 28, 2011 and 5.7% from $107.3 billion as of March 31, 2010. Cash management funds as reported were $6.0 billion, up from $7.5 billion in February 2011 and $5.8 billion in March 2010.
Estimate Revision Trends
Franklinis expected to release its second-quarter 2011 earnings on April 25, 2011. Over the last 30 days, 3 of the 15 analysts covering Franklin have increased their estimates for the second quarter of 2011, while no downward revision was witnessed.
Currently, the Zacks Consensus Estimate for the second quarter is operating earnings of $1.97 per share, a surge of 27.18% from the year-ago quarter. Furthermore, over the last 30 days, operating earnings estimates for the second quarter of 2011 increased by a penny to $1.97 per share.
Competitors’ Performance
Franklin’s closest competitor Invesco Ltd. (IVZ) also reported preliminary AUM at the end of March 2011 of $641.9 billion, up 0.1% from $641.1 billion at the end of February 2011. The marginal improvement in AUM was primarily driven by positive returns from financial markets and net long-term flows. These were partially offset by increased volatility of foreign currencies against the U.S. dollar that resulted in $0.9 billion in AUM.
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 worsened by the costly regulatory matters following the Reform Act. The regulations could negatively affect the company’s AUM, increase costs and affect its results.
Currently, Franklin retains a Zacks #3 Rank, which translates to a short-term ‘Hold’ rating.
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