Franklin Resources 2025 Q2 Earnings Net Income Plummets 93.4%

Franklin Resources (BEN) reported its fiscal 2025 Q2 earnings on May 02nd, 2025. Franklin Resources fell short of expectations with net income drastically declining, despite EPS growth. The company adjusted its guidance, anticipating flat total expenses compared to 2024 and projecting cost savings of $200 million to $250 million entering fiscal 2026. Franklin Resources maintained a neutral stance on its effective fee rate for Q3, expecting a slight increase in Q4. The strategic outlook remains focused on managing alternative asset growth, which could drive future savings.

Revenue

Franklin Resources experienced a 1.9% decrease in total revenue, reaching $2.10 billion in Q2 2025 compared to $2.14 billion in the same quarter of the previous year. The investment management fees segment contributed $1.67 billion, while sales and distribution fees added $364.90 million. Shareholder servicing fees accounted for $61.90 million, with other sources providing an additional $11 million, culminating in total operating revenues of $2.11 billion.

Earnings/Net Income

Franklin Resources's EPS rose 13.0% to $0.26 in 2025 Q2 from $0.23 in 2024 Q2, marking continued earnings growth. Meanwhile, the company's net income declined to $11.60 million in 2025 Q2, down 93.4% from $175.30 million reported in 2024 Q2. Despite EPS improvement, net income figures reflect a challenging quarter.

Post Earnings Price Action Review

The earnings report metrics of Franklin Resources (BEN) had notable effects on its stock price, as evidenced by historical trends and performance following earnings releases. Positive revenue surprises, such as the $510 million revenue beat in Q2 2025, can lead to favorable market reactions, as seen in a 6.94% stock price increase. Although revenue decreased by 1.9% year-over-year, it still surpassed the Zacks Consensus Estimate, triggering a stock surge. Net income, although showing a 21.9% year-over-year increase to $151.4 million, tends to influence stock price confidence. However, the direct impact varies with market conditions and investor sentiment. EPS performance also plays a crucial role; an EPS beat in Q2 2024 led to a 5.26% stock price increase, while an EPS miss in Q1 2025 did not significantly impact the stock price. Ultimately, investor sentiment around the earnings report and strategic direction can influence stock movements beyond immediate metrics.

CEO Commentary

Jenny Johnson, President and Chief Executive Officer, highlighted that "the first few months of 2025 have been marked by significant market turbulence" but emphasized that Franklin Templeton is well-positioned to assist clients amid volatility. She noted that the firm's diversified approach allows it to benefit from major market resets that prompt clients to adjust asset allocations. Johnson asserted that, despite challenges, there has been strong client activity, particularly in institutional investments. She described the company's strengths in providing comprehensive investment solutions and mentioned that "our investment teams remain cautiously constructive on the outlook for global equity markets," reflecting a balanced yet optimistic perspective.

Guidance

Matt Nicholls, Chief Financial Officer and Chief Operating Officer, provided guidance indicating an expected effective fee rate for Q3 of approximately 38 basis points, with an anticipated slight increase in Q4. He projected total expenses for fiscal year 2025 to be roughly flat compared to 2024, estimating compensation expenses at around $810 million. Nicholls also noted that the firm expects to achieve $200 million to $250 million in cost savings entering fiscal 2026, contingent on growth in alternative assets.

Additional News

Within the past three weeks, Franklin Resources has been actively engaging in strategic initiatives. The company announced a quarterly cash dividend of $0.32 per share, payable on April 11, 2025, representing a 3.2% increase over the same quarter last year. Franklin Templeton reported preliminary month-end assets under management (AUM) of $1.53 trillion as of March 31, 2025, reflecting the impact of negative markets and net outflows. Additionally, Franklin Templeton launched the Franklin Lexington Private Markets Fund, targeting wealth channel clients globally, and successfully raised $2 billion in AUM. These strategic moves indicate Franklin Resources' ongoing commitment to enhancing shareholder value and expanding its market presence amidst challenging conditions.