Franklin's (BEN) Q2 Earnings Beat Estimates On Higher AUM

Franklin Resources Inc. (BEN Quick Quote BEN - Free Report) reported second-quarter fiscal 2021 (ended Mar 31) adjusted earnings of 79 cents per share, which topped the Zacks Consensus Estimate of 74 cents. The bottom line also compared favorably with the earnings of 66 cents per share recorded in the prior-year quarter.

The company’s results display top-line strength during the quarter. Also, a solid capital position and higher assets under management (AUM) were positives. However, higher expenses were a major drag. Additionally, net outflows were an undermining factor.

Adjusted operating income came in at $581.1 million in the reported quarter compared with the prior-year quarter’s $385.9 million.

Including certain notable items, net income was $381.8 million or 74 cents per share compared with $79.1 million or 16 cents per share recorded in the prior-year quarter.

Higher Revenues Partly Offset by Elevated Costs

Total operating revenues jumped 85% year over year to $2.08 billion in the fiscal second quarter on higher investment management, sales and distribution, other and shareholder-servicing fees.

Investment management fees surged 76% year over year to $1.6 billion, while other revenues increased 35% to $8.8 million. Moreover, sales and distribution fees were up 21% to $413.6 million. Also, shareholder-servicing fees climbed 2% on a year-over-year basis to $55.7 million.

Total operating expenses flared up 67% year over year to $1.62 billion. This upsurge resulted from rise in all components of expenses, including compensation and benefits, information systems and technology, general, administrative, and other along with sales, distribution, and marketing expenses.

The company reported an operating margin of 22% compared with 25.9% in the year-ago quarter.

Higher AUM

As of Mar 31, 2021, total AUM came in at $1.5 trillion, up slightly from the previous month and up 158% from $580.3 billion as of Mar 31, 2020. Notably, the company recorded net new outflows of $4.2 billion during the January-March period.

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