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Franklin’s (BEN) Cost Control Efforts on Track: Time to Buy?


On Jun 16, we issued an updated research report on Franklin Resources, Inc. BEN. The company has been continuously reducing expenses and enhancing shareholder value. However, the company’s declining assets under management (AUM) keeps us apprehensive.

Franklin’s shares have gained 30.7% over the last one year, outperforming the Zacks categorized Financial – Investment Management industry’s rally of 20.0%.

Moreover, the company’s earnings estimates for fiscal 2017 and fiscal 2018 have been revised 4.0% and 2.5% upward, respectively, in the last 60 days. As a result, the stock currently carries a Zacks Rank #2 (Buy).

The company has successfully implemented cost control measures and reduced expenses in the last two fiscal years. Further, management expects costs to remain at the current level or fall slightly in fiscal 2017.

Also, Franklin is committed to boosting investors’ confidence in the stock through its steady capital deployment measures. The company hiked dividends every year since its inception in 1981, with the latest increase being 11% in Dec 2016. Further, in Jun 2016, it announced an additional repurchase authorization of up to 50 million shares. Such activities reflect its strong liquidity position and capital strength.

However, the company witnessed fall in AUM in fiscal 2016 and first half of fiscal 2017, which led to a decline in investment management fees — its main source of revenues. Though AUM level has risen slightly in the first two months of the current quarter, decline in AUM and revenues in the future can hurt the company’s profitability.

Other Stocks to Consider

Some stocks worth considering in the same space include Lakeland Bancorp, Inc. LBAI, Artisan Partners Asset Management Inc. APAM and Lazard Ltd. LAZ. All these stocks hold a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lakeland has witnessed an upward earnings estimate revision of 2.8% for the current year, in the past 60 days. Also, its shares have jumped 75.0%, over the last one year.

Artisan Partners’ earnings estimates have been revised upward by 5.0% for the current year, in the past 60 days. Also, over the last one year, its shares have gained 6.6%.

Lazard has witnessed an upward earnings estimate revision of 3.3% for the current year, in the past 60 days. Its shares have gained 39.4% over the last one year.

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