Despite concerns about outflows from equity and fixed income funds, the fourth quarter is shaping up to be an excellent earnings season for asset management firms.

To be sure, the stock market’s recent rally has cooperated with the firms that dominated the fourth-quarter 2010 earnings news headlines in the finance sector this week. Flows for many managers now remain positive as equity fund outflows and fixed income fund inflows have achieved some equilibrium, making asset management stocks more attractive.

“We think flows for many managers remained positive as equity fund outflows and fixed income fund inflows both moderated. We believe the risk/reward in asset management stocks is still attractive despite the recent rally, and our top picks include Franklin Resources (BEN), Invesco Ltd. (IVZ) and Calamos Asset Management (CLM),” wrote equity analysts Robert Lee and Larry Hedden of Keefe, Bruyette & Woods North America Equity Research in an asset managers preview earlier this month.

Their predictions were correct, as both Franklin and Invesco reported strong earnings on Thursday. Calamos is scheduled to report on Feb. 4.

Franklin’s profits rose 74%, with the mutual fund company posting earnings of $501.2 million, or $2.23 per share, on $1.70 billion in revenues versus. In 2010's third quarter, BEN had $372.9 million in net income, or $1.65 per share, on $1.53 billion in revenues. In the fourth quarter of 2009, net income was $355.6 million, or $1.54 per share, on $1.38 billion in revenues.

Invesco’s profits also rose—by 44%–but nevertheless disappointed analysts’ expectations as stronger stock market results were tempered by fallout from the firm’s June acquisition of Morgan Stanley’s mutual-funds business. EPS for the year was 32.9% higher, at $1.01 compared with $0.76 in 2009, while quarterly

EPS came in at $0.37 compared with $0.32 in the third quarter. Analyst consensus was for EPS of $0.40. Profits totaled $465.7 million versus $322.5 million in 2009.

The most recent addition to the positive earnings new, T. Rowe Price (TROW), on Friday morning reported a 26% earnings increase thanks to a nearly 20% gain in revenue and a rise in AUM; the earnings beat analysts’ estimates.

Both AUM and investment-advisory fees continue to rise for T. Rowe, leading President and Chief Executive James Kennedy to say that the company has "largely recovered" from the economic crisis. T. Rowe reported a profit of $190.8 million, or $0.72 a share (versus analysts’ expectations of $0.69/share), on a 19% revenue rise to $647.5 million. In the fourth quarter a year earlier, net income was $152 million, or $0.57 cents.

Earlier in the week, on Tuesday, investor willingness to put money into riskier securities pushed BlackRock (BLK) past analysts’ expectations, with diluted earnings per share at $3.42 versus consensus EPS estimates of $2.90. The world’s largest asset manager, clearly benefiting from its acquisition of Barclays Global Investors, broke its quarterly earnings record as profits rose 107% and annual revenue soared 157%.

Legg Mason (LM) on Wednesday announced a 37% jump in profits for the third quarter of 2011 along with a 5% rise in revenues, thanks to an increase in fees. But the firm also reported continuing outflows: $12.9 billion from bond funds and $3.3 billion from stock funds in the quarter. Profits totaled $61.6 million, or $0.41 per share, versus $0.28 a year ago.

Also on Wednesday, Piper Jaffray (PJC) reported strong sales and better-than-expected net revenues as the investment bank’s capital-markets unit saw an 18% increase in the quarter to $151 million. The firm saw profits of $9.4 million, or $0.49 per share, for the fourth quarter of 2010 versus $12.3 million, or $0.63, in the same period of 2009. Piper Jaffray’s results included a $9.1 million after-tax charge that reduced net income by $0.48 per share for a charge linked to Piper Jaffray restructuring of its European operations. Excluding that charge, the company earned $0.97 cents per share.

Another company that released Q4 2010 earnings on Thursday, Janus Capital Group (JNS), beat both EPS and revenue estimates, reporting net income of $65.9 million, or $0.36 per share, compared with net income of $37.0 million, or $0.20 per share, in the fourth quarter of 2009. Revenue was $275.7 million versus $250.6 million in the year-ago period and $243.8 million in the third quarter for the mutual fund company. This performance beat analysts’ earnings estimates of $0.21 cents a share and revenue estimates of $262.7 million.

Although Q4 was strong for asset managers, KBW’s analysts nevertheless viewed the group’s performance as lackluster in the last year.

“Considering the growth in AUM and earnings in 2010 and new business trends that have, overall, generally been positive, the overall performance of asset manager stocks in 2010 was lackluster at best, although it varies widely from stock to stock,” they said. “In general, we think investor unease with regard to the economic outlook has weighed on the group, while several stocks, including AllianceBernstein, Artio, BlackRock, and Janus were negatively impacted by concerns with regard to organic growth.”

“To some degree,” the KBW analysts added, “we attribute the lackluster performance for much of the year to the fact that over the course of 2010, many investors saw a lack of incremental catalysts, such as better flows or margins, or were generally concerned with the near-term outlook and fears of a double-dip recession. BlackRock, in particular, saw its premium valuation erode as investors became concerned with the ability to grow an asset manager with $3.4 trillion in AUM, among other things. Franklin Resources, despite generating strong organic flows and EPS growth, has been weighed down by concerns regarding future fixed income flow trends.”

Read a roundup of week one of 2010 Q4 earnings at