A stagnant market's not making life easy for the big asset management companies. But don't expect quarterly earnings season to be a bloodbath, either.

Growth is likely to prove scarce as money managers post numbers this month. Wall Street is especially skeptical of how things are going at

Janus

(JNS)

, which has been among the firms hardest hit by the recent mutual fund trading scandal. But every firm will feel the slowdown in equity inflows to one degree or another, observers predict.

"Ultimately, it's the market that really drives this group," says Robert Lee, an analyst for Keefe Bruyette & Woods.

Even so, some analysts see the possibility for an upside surprise or two. They suggest focusing on

Franklin Resources

(BEN) - Get Report

and

T. Rowe Price

(TROW) - Get Report

, which have cashed in on changing tastes on Wall Street.

On Friday, Janus jumped 38 cents to $14.74, Franklin Resources added 9 cents to $57.87 and T. Rowe Price rose 50 cents to $50.43.

Oily Quarter

The market wasn't kind to the group in the third quarter, as higher oil prices and pre-election jitters pushed stock funds back into the red. That setback broke a string of quarterly gains dating back to March 2003. According to fund tracker

Lipper

, U.S. diversified equity mutual funds posted a 2.76% loss for the third quarter. That period, ended Sept. 30, saw the

Dow Jones Industrial Average

fall 3.4%, the

Nasdaq Composite Index

drop 7.4% and the

S&P 500

drop 2.3%.

Denver-based Janus is due to post third-quarter financial results before the market opens Thursday, Oct. 21. Analysts are expecting the company to earn 14 cents for the quarter, down from 26 cents a year ago and 17 cents last quarter. The consensus revenue forecast is $242 million, a 5.7% decrease from last year's $257 million.

Analysts say the company has made strides since last year's market-timing investigation by New York Attorney General Eliot Spitzer. The company reported this week that long-term net outflows dropped to $1.4 billion in September from $1.9 billion in August, due to lower overall redemptions. The company also announced this week that its assets under management actually rose in September, gaining 1.9% from the previous month to $130.2 billion. That was the first increase since December 2003. Nevertheless, the total is still down from the $147 billion in assets held last year at this time, even after a healthy run for funds.

Market-timing, or the frequent trading of mutual fund shares, is detrimental to long-term fund investors and most mutual companies promise to deter the practice.

Matt Snowling, an analyst at Friedman Billings Ramsey, warns that Janus' third-quarter earnings will be hit by money the company spent to fix its image. Snowling expects the company to earn 15 cents a share, a penny above the consensus estimate, but still calls the stock pricey considering the brand damage suffered during the scandal.

Balancing Act

Snowling has a more positive view on Franklin, which is due to report fiscal fourth-quarter earnings after the market closes on Thursday, Oct. 28. He expects the company to report results in line with the consensus view of 78 cents a share for the quarter, 13% higher than a quarter ago. Revenue is expected to increase 1.2% to $875 million, up from $863 million last quarter.

Franklin Resources announced this week that assets under management rose to $362 billion at the end of September from $353 billion at the end of August and $301.9 billion a year earlier. Of that total, equity funds accounted for $199.3 billion and fixed income accounted for $96.8 billion. Some $59 billion in "hybrid/balanced" offerings and $6.8 billion in money markets accounted for the remainder.

"Despite weaker equity markets, Franklin appears to have benefited from the strong inflows into equity/hybrid mutual funds, which totaled $1.5 billion in the first two months of the quarter, compared to just $1.2 billion for all of the prior quarter," says Snowling.

Both Snowling and KBW's Lee are looking favorably upon Baltimore-based T. Rowe Price, which expects to post third-quarter financial results on Tuesday, Oct. 26. The consensus earnings estimate is for the company to earn 63 cents for the quarter, up from 51 cents a year ago. The consensus revenue forecast is $316 million, a 22.2% increase.

Snowling is looking for T. Rowe to beat the consensus earnings estimate by a penny even in the face of slowing inflows for the third quarter.

"Strong relative fund performance, the advantage of its direct distribution model, resumption of share repurchases, a 12% decline in ad spending and the impact of average asset levels rolling forward at higher levels should enable the company to produce 25% year-over-year earnings growth and an operating margin of 43%," says Snowling.

But don't look for these stocks to start rolling until the bull market returns.