Franklin Resources, Inc. shares (NYSE: BEN) experienced a decline in today’s market, making it a significant stock for dividend-seeking investors to monitor. The firm serves a diverse clientele that includes international, national, institutional, and sovereign wealth investors across over 70 countries. With over seven decades in the investment field, Franklin Resources boasts a team of over 600 investment experts worldwide, providing a range of alternative investments and tailored multi-asset strategies. Alongside its subsidiary, Franklin Templeton, this company, headquartered in California, has earned a remarkable reputation through its historical success in investment management.
Franklin Resources Q2 Fiscal Year 2020 Results for the Period Ending March 31st, 2020
People want to diversify and maintain strong investment power and gain from the market value. This is why the BEN and its global brand have continued to raise its investment standards, a way of convincing investors to put more money into the company.
However, in its Q2 fiscal year 2020 results for the period ending March 31st, 2020, the company reported a -16.9% decline on the total assets under management to end at $580.3 billion. The net flows were also hit hard, and it is worth noting that this is an area the company has been struggling with for several quarters in a row.
Operating Revenue suffered a 5.3% decline and accomplished $1.34 billion, while net income equaled $79.1 million or $0.16 per share. This was also a fall from the $350.5 million or $0.70 per share in the year-ago quarter.
Nonetheless, during the 2007 – 2018 period, BEN experienced a compound rate increase of 3.3% per annum in the earnings-per-share. ETFs, whose expense ratios are lower compared to actively managed funds, had the biggest turnaround of growth in the asset management industry. The success of ETFs is expected to grow as more and more investors clinch on them.
Franklin Resources Has an Outstanding Balance Sheet
Despite all the declines in the company’s results of the Q2 fiscal year 2020, the company still had something positive to show; an extraordinary balance sheet. As a result, it was able to repurchase significant blocks of stock besides developing a solution for the inconsistent asset management industry.
The strength of the balance sheet was displayed through the company’s proposal to acquire Legg Mason, one of the world’s largest asset managers in a definitive agreement deal of $4.5 billion of all-cash consideration. The transaction, which would create a combined $1.5 trillion asset manager would go hand in hand with the assumption of $2 billion in debt.
With the current shift of behavior from investors, people familiar with the acquisition deal acknowledged that the deal will be a significant milestone for the industry’s two big players.
Legg Mason has a sizeable market value of more than $3.5 billion and $800 billion worth of assets under management. With more than 100years of experience and global presence, the asset manager focuses mainly on long-term investment solutions and strategies.
The Company Is Forecasting Lower Earnings This Year Due To the COVID-19 Crisis
Unfortunately, the company’s exceptional balance sheet does not take the company off the hook of long-term problems. Just like any other business, it has been hit hard by the coronavirus pandemic. There are signs that the virus could stay longer, and this means more economic impacts on investments. There could be increased price fluctuation in fast-growing industries like the biotechnology sector due to the prompt pace of product realignment and development.
Investments in emerging markets have more risks due to political uncertainty and currency fluctuations. However, Franklin Resources says that it will be using $2.50 in the underlying earnings power for evaluation and value estimation alongside a 4% growth rate.
Nonetheless, it may still not have a strong competitive advantage, hence the need to look for novel solutions; otherwise, the current outlook of its books could mean deteriorating profits in the years to come.
