Legg Mason Inc. Earnings: Beats the Street Despite Profit Decline

S&P 500 (NYSE:SPY) component Legg Mason Inc. (NYSE:LM) posted lower net income in the third quarter compared with a year-earlier period. Legg Mason is a global asset management company that offers investment management and related services to individual and institutional clients.

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Legg Mason Earnings Cheat Sheet for the Third Quarter

Results: Net income for the asset management company fell to $28.1 million (20 cents per share) vs. $61.6 million (41 cents per share) a year earlier. This is a decline of 54.4% from the year earlier quarter.

Revenue: Fell 13.1% to $627 million from the year earlier quarter.

Actual vs. Wall St. Expectations: LM reported adjusted net income of 55 cents per share. By that measure, the company beat the mean estimate of 27 cents per share. It fell short of the average revenue estimate of $655.7 million.

Quoting Management: Mark R. Fetting, Chairman and CEO of Legg Mason said, “It was a challenging quarter, with the cumulative effect of 2011’s second-half market turmoil impacting AUM and revenues. However, our core business held up well, the flow picture improved and investment performance remained strong. More generally, we enter calendar year 2012 having made significant strategic progress relative to long-term earnings per share growth. The streamlining efforts announced in May of 2010 have positioned us to realize $140 million in run rate savings starting in the fiscal 4th quarter, and our balance sheet increasingly affords us the opportunity to invest in organic growth, while thoughtfully returning capital to our shareholders. Ultimately, despite short term market movements, we remain confident in our prospects and intend to capitalize on opportunities that arise in the markets where our affiliates invest.”

Key Stats:

The company has now seen net income fall in each of the last two quarters. In the second quarter, net income fell 24.8% from the year earlier quarter.

The company has now topped analyst estimates for the last three quarters. It beat the mark by one cent in the second quarter and by one cent in the first quarter.

Revenue has fallen in the past two quarters. In the second quarter, revenue declined 0.7% to $669.9 million from the year earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 47 cents per share to 46 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. In the past month, the average estimate for the fiscal year has fallen from $1.60 per share to $1.51 abs.

Competitors to Watch: AllianceBernstein Holding LP (NYSE:AB), Westwood Hldgs. Group, Inc. (NYSE:WHG), Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), Epoch Holding Corp (NASDAQ:EPHC), Morgan Stanley (NYSE:MS), Pzena Investment Management, Inc. (NYSE:PZN), Artio Global Investors Inc. (NYSE:ART), Sanders Morris Harris Group (NASDAQ:SMHG), The Blackstone Group L.P. (NYSE:BX), and Affiliated Managers Group, Inc. (NYSE:AMG).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com