Franklin Resources, Inc. (NYSE:$BEN) is a global asset management company based in San Mateo, CA. Better known as Franklin Templeton, it has over $1.6 trillion in assets under management. Its clients include individuals, institutions, and retirement plans across fixed-income, equity, hybrid, and multi-asset strategies.
Leveraging the expertise of its investment managers, Franklin Templeton aims to deliver strong investment performance and exceptional client service to its diverse global client base.
Franklin Resources Earnings Exceed Expectations But Decline Sequentially
Franklin Templeton posted first-quarter diluted EPS of $0.50, surpassing Wall Street’s expectations of $0.57. The reported diluted EPS is a 56% increase from $0.32 in the prior year’s quarter.
However, the reported net income of $251.3 million was a 15% decline from the previous quarter. Operating income surged 6% year-over-year to $206.5 million but dropped 39% sequentially.
Assets Under Management Up on Market Appreciation
The company’s assets under management (AUM) rose by 5% Q/Q and 6% Y/Y to $1.455 trillion, mainly driven by market appreciations. Additionally, the closing of the Putnam Investments acquisition boosted AUM by $148 billion.
In Q124, Franklin Templeton reported $5 billion in long-term net outflows, a 28% Q/Q decline from the $6.9 billion reported in Q423. The figure represented a 54% Y/Y decline from the $10.9 billion long-term net outflows reported in Q123.
For Q124, Franklin Resources reported reinvested distributions of $10.8 billion, compared to $2.7 billion in the previous quarter and $12.1 billion last year.
Alternatives, Multi-Asset Products See Inflows
Franklin Resources saw positive long-term net flow in key areas, including Multi-Asset, Alternatives, ETFs, Equity, and SMAs.
In the Alternatives segment, their three largest alternatives managers, Clarion Partners, Benefit Street Partners, and Lexington Partners, all had net inflows in Q124 for a combined total of $3.8 billion. The asset manager stated that it has continued to experience exceptionally robust client demand in private credit and private equity. For the quarter, the segment had net inflows of $2.7 billion.
The Multi-Asset segment had net inflows of $500 million, driven by the company’s Custom Indexing solution platform Canvas and Franklin Templeton Investment Solutions. Canvas has experienced steady growth and registered inflows every quarter since its launch in 2019. Additionally, its AUM has more than doubled to $5.9 billion since its acquisition.
Geographic Diversity Provides Tailwind
Franklin Resources continued to benefit from its broad global reach, with no-Us regions recording aggregated positive net flows with an AUM of around $436 billion. The company experienced net outflows for the US. However, they reported a 14.8% Q/Q increase in US gross sales.
Franklin Resources Earnings Allow Ongoing Investments
Franklin Resources remains focused on expense discipline while continuing to invest in growth and innovation initiatives. It ended the quarter with $5.6 billion in cash and cash equivalents and investments to maintain its competitive positioning.
CEO Sees Momentum Across Key Areas
Commenting on the Q1 results, President and CEO Jenny Johnson said, “Our first fiscal quarter results reflect ongoing momentum in a number of significant areas across asset classes, investment vehicles, and geographies to meet the varied needs of our diverse global client base.”
Johnson cited the Putnam Investments acquisition as immediately accretive while unlocking growth opportunities in retirement and insurance markets. Overall, the CEO believes Franklin Templeton is well-positioned to capitalize as investors deploy sideline cash in 2024.
Franklin Resources (BEN) stock performance
During late afternoon trading, Franklin Resources (BEN) stock has lost 0.29% of its value as of Wednesday, January 31, 2024. It is valued at $27.05 per share as of 02:09 PM in New York. It has had a bad showing, falling 13.43% and 7.63% in the past twelve and six months, respectively. YTD, the stock is down 7.78%.
Overall Mixed Results
Franklin Resources’ Q1 2024 Financial Year earnings report was a bag of mixed results. The company surpassed EPS and revenue estimates. However, net income and operating income declined sequentially. Despite this, the company grew its AUM to $1.455 trillion.
While uncertainties remain, Franklin Resources has the resources to identify viable growth opportunities. They had a solid showing in the developing segment of alternatives, ETFs, and multi-assets. The company also announced a 3% increase in quarterly dividend to $0.31 per share.
Thoughts Going Forward
Despite the recent mixed Q1 results, Franklin Templeton retains key competencies from which growth could be sustained. From worldwide presence, alpha emphasis teams, developing regions exposure, and Putnam’s growing portfolio.
Franklin Templeton continues to outperform its peers. It has a strong balance sheet and is increasing its focus on its growth segments. As such, it could still pull a turnaround on its multi-year stock decline. However, the stock market is overall bearish on asset management stocks.
While stock growth for Franklin Resources remains elusive, the company has seen reinvestment growth. Its focus on long-term goals and the diversity of its AUM will help it drive sustainable growth over time, even amidst headwinds in the asset management sector.
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