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Why Franklin Resources Shares Are Soaring Today

By James Brumley – Nov 1, 2021 at 1:42PM

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An encouraging glimpse at last quarter's growth and plans for a brilliant acquisition have stoked investors, though perhaps a bit too much.

What happened

Shares of mutual fund company Franklin Resources (BEN 0.33%) are up more than 12% as of midsession Monday following the release of its preliminary fiscal fourth-quarter results and the announcement that it intends to acquire Lexington Partners.

So what

Franklin Resources -- better known as Franklin Templeton -- wrapped up a solid fiscal 2021 with an impressive fourth-quarter report. Although not the official numbers, the mutual funds manager indicates it's likely to earn an adjusted $1.26 per share for the three-month stretch ending in September on revenue of $2.18 billion. That top line is up 28% year over year, while earnings improved dramatically from the $0.56 per share the company reported in the comparable quarter of 2020. Both numbers beat analysts' estimates for Q4. For the full fiscal year, revenue grew 51%, and per-share operating earnings grew 43%, also exceeding analysts' outlooks.

Rising bar chart plotted with a trendline on a chalkboard.

Image source: Getty Images.

Franklin Resources also announced on Monday that it intends to acquire secondary private equity and co-investment fund outfit Lexington Partners, at a price of $1.75 billion. In addition to Lexington's $34 billion worth of assets it currently manages, the deal will put Franklin Resources in a part of the money management market where it doesn't currently have a particularly strong foothold to leverage.

Now what

Both the preliminary quarterly report and the decision to acquire Lexington Partners L.P. are bullish to be sure. Today's surge, however, is uncharacteristically strong for this stock despite Franklin Resources shares' tepid performance since June's peak; there's plenty of room and reason to expect at least a small wave of profit-taking after Monday's dust settles. Interested investors may want to wait until that happens before diving into this well-respected and proven name.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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