Earnings Miss: Franklin Resources, Inc. Missed EPS By 51% And Analysts Are Revising Their Forecasts

Last week, you might have seen that Franklin Resources, Inc. (NYSE:BEN) released its second-quarter result to the market. The early response was not positive, with shares down 8.4% to US$22.97 in the past week. Results overall were not great, with earnings of US$0.23 per share falling drastically short of analyst expectations. Meanwhile revenues hit US$2.2b and were slightly better than forecasts. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Franklin Resources

Taking into account the latest results, the current consensus from Franklin Resources' six analysts is for revenues of US$8.34b in 2024. This would reflect a credible 3.0% increase on its revenue over the past 12 months. Per-share earnings are expected to expand 16% to US$1.90. In the lead-up to this report, the analysts had been modelling revenues of US$8.32b and earnings per share (EPS) of US$2.06 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target fell 6.4% to US$25.94, with the analysts clearly linking lower forecast earnings to the performance of the stock price. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Franklin Resources at US$29.00 per share, while the most bearish prices it at US$23.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Franklin Resources' revenue growth is expected to slow, with the forecast 6.1% annualised growth rate until the end of 2024 being well below the historical 8.9% p.a. growth over the last five years. Compare this to the 274 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 5.9% per year. Factoring in the forecast slowdown in growth, it looks like Franklin Resources is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Franklin Resources. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Franklin Resources' future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Franklin Resources going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 3 warning signs for Franklin Resources that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.