Franklin Resources' AUM Growth on Track - Analyst Blog

On Jun 16, 2014, we issued an updated research report on Franklin Resources Inc. BEN. This California-based investment management company has exhibited efficient efforts in boosting its organic growth with increasing assets under management (:AUM) amid a competitive environment in the industry.

AUM recorded consecutive growth in the first 2 months of third-quarter fiscal 2014, followed by an 8.0% year-over-year increase during the first half of fiscal 2014. Driven by market appreciation and net new inflows, Franklin's AUM recorded a 5-year (fiscal 2009-fiscal 2013) CAGR of 12.70%. Given such an impressive performance record, we expect the uptrend to follow in the upcoming quarters as markets are improving, though at a sluggish pace.

Further, we remain encouraged owing to Franklin's efforts in enhancing shareholder value. During the first half of fiscal 2014, the company returned over $455.8 million to the shareholders through dividends and share repurchases. The company has hiked its dividend every year since its inception in 1981 with the latest hike of 20% in Dec 2013.

Despite these positives, we believe there are certain concerns that may pose threats to the company's financials in the near term. These include escalating operating expenses and the prevailing stringent regulatory landscape.

Further, over the past 60 days, the Zacks Consensus Estimate declined nearly 1% to $3.74 per share for fiscal 2014. Also, for fiscal 2015, it declined 1.9% to $4.08 per share.

Franklin currently carries a Zacks Rank #3 (Hold).

Cohen & Steers Inc. CNS and Woori Finance Holdings Co., Ltd. WF and Ameriprise Financial, Inc. AMP are better-ranked stocks in this space. Both Cohen & Steers and Woori Finance sport a Zacks Rank #1 (Strong Buy) while Ameriprise Financial holds a Zacks Rank #2 (Buy).