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Rating:Franklin Misses As Its Funds' Short-Term Performance Dips Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, February 02, 2015

Franklin Misses As Its Funds' Short-Term Performance Dips

Reported by Neil Anderson, Managing Editor

Franklin Templeton [profile] parent Franklin Resources' results fell slightly short of expectations, as many of its non-fixed income funds suffered short-term performance woes.

On Friday, the San Mateo, California-based mutual fund shop unveiled diluted earnings per share of $0.91 for fiscal Q1 2015 (ended 12/31/2014), down from $1.02 in fiscal Q4 2014 and $0.96 in fiscal Q1 2014, and below expectations by $0.02. It reported fiscal Q1 2015 revenues of $2.0643 billion, below expectations by $70 million.

After a prerecorded earnings call, Franklin chairman, president and CEO Greg Johnson and Franklin executive vice president and chief financial officer Ken Lewis talked with analysts about Franklin's results.

Franklin reported strong asset-weighted performance in its mutual funds over the long-term. Yet its equity and hybrid funds are suffering a short-term dip. 21 percent of its equity and hybrid mutual fund assets were in the top two quartiles of one-year performance; compare that 68 percent in the top two quartiles for three-year performance, 73 percent for five-year performance, and 71 percent for ten-year performance. Yet fixed-income performance looked better, with 59 percent of assets in the top two quartiles for one-year performance, 80 percent for three-year, 83 percent for five-year, and 92 percent for ten-year.

Michael Kim of Sandler O'Neill asked on the call about the short-term underperformance. In response, Johnson noted the headwinds created by the strong U.S. dollar, as the firm "has a longer term approach and doesn't hedge against the dollar."

When Ken Worthington of J.P. Morgan asked about what would drive the fund firm "to the next level of growth," Johnson said he "would like to see a very diversified organic growth" across different areas.

"I think it is hard just to call out any one area," Johnson said on the call, according to Seeking Alpha's transcript of the call.

And Bill Katz of Citigroup asked about "gross sales dynamics" and the recent "relatively ... flattish type of backdrop."

"A more diversified mix and strong performance is really what we can control and hopefully that organic growth takes care of itself," Johnson's reply reads in the Seeking Alpha transcript.

To dig deeper into Franklin's results, read the full earnings release, the slideshow for the prerecorded call, and Seeking Alpha's transcript of the call with analysts. 

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