Franklin Resources Fourth Quarter Earnings Preview

Franklin Resources (NYSE:BEN) will announce its fourth quarter earnings on Thursday, October 25, 2012. Analysts have become increasingly bullish on the company in the last month, with consensus earnings per share estimate moving up from $2.20 a share to the current expectation of earnings of $2.28 a share.



Earnings are perhaps the single most studied number in a company's financial statements because they show a company's profitability. SEE: Earnings: Quality Means Everything

What to Expect: The consensus estimate for Franklin's earnings is $2.28 per share, up 21.3% from a year ago when the company reported earnings of $1.88 per share.

This is an increase from $2.19 three months ago. For the fiscal year, analysts are expecting earnings of $8.95 per share.

Franklin is expected to report revenue of $1.83 billion for the quarter, beating last year's figure of $1.61 billion by 13.4%. Revenue of $7.13 billion is expected for the fiscal year.



Company Performance: Revenue fell year-over-year in the third quarter to end a three-quarter growth streak. It fell 5.6% in the third quarter after rising 4.1%in the second quarter, 1.5% in the first quarter and 2.8% in the fourth quarter of the last fiscal year.

The company has seen steady earnings for the last eight quarters, but income has been dropping year-over-year by an average of 0.5% over the last four quarters.

BEN's P/E ratio of 15.3 falls below the industry average of 20.7. A low P/E ratio may indicate that the market expects relatively slower earnings growth. A simple P/E ratio can reveal the stock's real market value and show how the valuation compares to its industry group or a benchmark like the S&P 500 Index. High P/E stocks could be "growth" stocks, while low PE stocks may be "value" stocks. SEE: Profit With The Power Of Price-To-Earnings



Over the past quarter, the stock price has risen to $130.53 from $107.37 on July 24, 2012. Franklin's best recent streak was when its price gained $6.12 per share between September 11, 2012 and September 14, 2012.





The Competition: Franklin Resources is a global investment manager that offers investment vehicles for clients, including individuals, institutions, and trusts. The majority of analysts (nine of 17) rate Franklin a buy. They have become increasingly pessimistic about the stock, as the number of buy ratings has dropped slightly over the last three months.

The company's closest competitor in the investment services industry is BlackRock (BLK). Analysts are less optimistic about Franklin than about BlackRock. Ten out of 17 analysts rate the latter a buy.