On Tuesday, BofA Securities adjusted its outlook on Franklin Resources (NYSE:BEN), reducing the price target to $23.00 from the previous $25.00. The firm is maintaining its Underperform rating on the stock.
The adjustment follows Franklin Resources' report of long-term net inflows in the second fiscal quarter of 2024, amounting to $6.9 billion, a significant change from the first fiscal quarter. This improvement was largely attributed to a substantial $13.7 billion funding from Great-West's $25 billion allocation.
Excluding the impact of Great-West's contribution and reinvested distributions totaling $3.1 billion, Franklin Resources experienced core net outflows of $9.9 billion. BofA Securities anticipates that net flows will remain strong in the third fiscal quarter of 2024, as a large portion of the remaining $11.3 billion from Great-West is expected to fund.
However, a shift back to net outflows is projected for the fourth fiscal quarter due to seasonal factors and the dwindling influence of Great-West's allocations.
Looking ahead, the firm forecasts a gradual improvement in Franklin Resources' net flow trajectory, bolstered by slightly better investment performance, particularly from Putnam, and predictions of significant rebalancing into bonds through the years 2024 and 2025.
Despite these positive indicators, BofA Securities expects that, excluding reinvested distributions, Franklin Resources will face net outflows again in 2024 and 2025, although these outflows are predicted to be less severe than those experienced in 2023.
InvestingPro Insights
With Franklin Resources (NYSE:BEN) facing a revised outlook from BofA Securities, insights from InvestingPro provide additional context to the stock's current situation. The company's market capitalization stands at $12.29 billion, reflecting its significant presence in the financial sector. Despite recent challenges, Franklin Resources has maintained a track record of dividend reliability, having upheld dividend payments for 44 consecutive years, which is a testament to its commitment to shareholder returns. The dividend yield is notably high at 5.3%, which may be appealing to income-focused investors.
An InvestingPro Tip indicates that the stock is currently in oversold territory according to the RSI, suggesting that it may be undervalued at its current price. Additionally, the company has been profitable over the last twelve months, and analysts predict it will remain profitable this year. These factors, combined with a P/E ratio (adjusted for the last twelve months as of Q2 2024) of 11.28, could imply that the stock is poised for a potential rebound once market sentiment shifts.
For investors seeking deeper analysis and more comprehensive insights, InvestingPro offers additional tips on Franklin Resources. Using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable tips and make more informed investment decisions.
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