Will Lower Market Volatility Hurt Franklin's (BEN) Q3 Earnings?

Core Viewpoint - Franklin Resources Inc. (BEN) is expected to report a decline in earnings for the third quarter of fiscal 2024, while revenues are anticipated to rise, reflecting mixed performance in the asset management sector [1][2]. Financial Performance - The consensus estimate for earnings is 58 cents per share, indicating a 7.9% decline from the previous year [1]. - Revenue is projected at $2.15 billion, representing a year-over-year increase of 9.2% [2]. - Franklin's total assets under management (AUM) as of June 30, 2024, are estimated at $1.66 trillion, a 20.9% increase from the prior year [3]. Market Conditions - The S&P 500 Index rose over 4% in the April-June quarter, positively impacting asset managers, although the fixed-income market lagged behind [3]. - Client activity remained decent despite lower volatility in the fixed-income market, as investors sought higher yields [4]. Revenue Breakdown - Investment management fees are estimated at $1.65 billion, down 3.9% sequentially [4]. - Sales and distribution fees are projected at $344.5 million, also reflecting a 3.9% decline from the previous quarter [4]. - Shareholder servicing fees are expected to be $61.8 million, indicating a 9% sequential decline [5]. Expense Outlook - Compensation and benefits are anticipated to total $820 million, including performance fees of $40 million [6]. - Information systems and technology expenses are projected at $150 million, with occupancy expenses at $80 million [7]. - General, administrative, and other expenses are estimated between $175 million and $180 million, influenced by advertising spending [7]. Earnings Prediction - The current Earnings ESP for Franklin is -3.13%, indicating a lower likelihood of an earnings beat [8]. - Franklin holds a Zacks Rank of 4 (Sell), suggesting a cautious outlook for the upcoming earnings report [8].