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Franklin Resources Beats Earnings Estimates and Reports Strong Growth in Private Market Strategies

AInvestMonday, Jan 29, 2024 1:32 pm ET
2min read

Franklin Resources, a leading global investment management organization, has surpassed market expectations in its recent earnings report for the first quarter ending December 31, 2023. The company reported a significant increase in net income, diluted earnings per share, and operating income, showcasing its resilience and adaptability in the asset management industry.

Franklin Resources' net income reached $251.3 million or $0.50 per diluted share, reflecting a 52% increase from the net income of $165.6 million or $0.32 per diluted share reported in the same quarter of the previous year. Operating income also witnessed a rise, amounting to $206.5 million compared to $194.0 million in the prior year.

The company's diverse portfolio, which includes equity, fixed-income, multi-asset/balanced funds, alternatives, and money market funds, has contributed to its financial success. Over a third of its total assets under management (AUM) are invested in global/international strategies, with nearly 29% of managed assets sourced from clients outside the United States.

While Franklin Resources experienced a mixed performance in the first quarter, with year-over-year increases in net income and operating income, it faced a quarter-over-quarter decline in both metrics. Despite these challenges, the company reported positive net flows into alternatives, multi-asset, equity, ETFs, and SMAs, as well as continued positive net flows in non-U.S. regions.

The company's focus on private market strategies has resulted in substantial inflows into its largest alternative managers, Benefit Street Partners, Clarion Partners, and Lexington Partners. In the recent months, Lexington Partners announced the closing of its latest flagship global secondary fund with $22.7 billion in total capital commitments, with approximately 20% of the capital raised from the wealth management channel. The fund ranks among the largest raised to date in the secondary market, surpassing Lexington's prior secondary fund, which closed with $14 billion in 2020.

Total AUM increased to $1.455 trillion during the quarter, a 6% rise due to the positive impact of net market change, distributions, and other, as well as $4.7 billion in cash management net inflows, partially offset by $5.0 billion in long-term net outflows.

Jenny Johnson, President and CEO of Franklin Resources, commented on the results, stating, 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.

In terms of financial details, Franklin Resources reported operating revenues of $1.991 billion, a slight increase from the previous year. The company's stockholders' equity stood at $12.6 billion, and it repurchased 2.4 million shares of its common stock during the quarter for a total cost of $58.8 million.

Franklin Resources' focus on expense discipline and investment in growth and innovation is evident through its adjusted operating margin of 27.3% and adjusted net income of $328.5 million. The company's strong balance sheet, with cash and cash equivalents and investments totaling $5.6 billion, further supports its financial position and ability to adapt to changing market conditions.


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