Legg Mason Third Quarter Earnings Sneak Peek

S&P 500 (NYSE:SPY) component Legg Mason, Inc. (NYSE:LM) will unveil its latest earnings tomorrow, Friday, February 1, 2013.  Legg Mason is a global asset management company that offers investment management and related services to individual and institutional clients.

Legg Mason, Inc. Earnings Preview Cheat Sheet

Wall St. Earnings Expectations: The average estimate of analysts is for profit of 54 cents per share, a rise of more than twofold from the company’s actual earnings for the same quarter a year ago. During the past three months, the average estimate has moved up from 52 cents. Between one and three months ago, the average estimate moved up. It has dropped from 55 cents during the last month. Analysts are projecting profit to rise by 1.3% compared to last year’s $1.56.

Past Earnings Performance: The company topped estimates last quarter after missing forecasts the quarter prior. In the second quarter, it reported net income of 75 cents per share against a mean estimate of profit of 56 cents per share. In the first quarter, it missed forecasts by 9 cents.

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A Look Back: In the second quarter, profit rose 42.6% to $80.8 million (60 cents a share) from $56.7 million (39 cents a share) the year earlier, exceeding analyst expectations. Revenue fell 4.4% to $640.3 million from $669.9 million.

Here’s how Legg Mason traded following its last earnings report 3 months ago and leading up to its upcoming earnings report this week:

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Stock Price Performance: Between October 30, 2012 and January 28, 2013, the stock price rose $3.06 (12.3%), from $24.93 to $27.99. The stock price saw one of its best stretches over the last year between June 25, 2012 and July 3, 2012, when shares rose for seven straight days, increasing 10.1% (+$2.47) over that span. It saw one of its worst periods between October 17, 2012 and October 24, 2012 when shares fell for six straight days, dropping 5% (-$1.29) over that span.

Wall St. Revenue Expectations: Analysts predict a rise of 8.1% in revenue from the year-earlier quarter to $677.6 million.

Key Stats:

On the top line, the company is hoping to use this earnings announcement to snap a string of four-straight quarters of revenue decreases. Revenue fell 13.2% in the third quarter of the last fiscal year, 9.1% in fourth quarter of the last fiscal year and 12.1% in the first quarter and then fell again in the second quarter.

Balance Sheet Analysis: The company’s current ratio of assets to liabilities came in at 3.06 last quarter. Having a ratio above 2:1 is usually considered a good indicator of a company’s liquidity and ability to meet creditor demands. The company regressed in this liquidity measure from 3.31 in the first quarter to the last quarter driven in part by an increase in liabilities. Current liabilities increased 18.2% to $599.3 million while assets rose 9.1% to $1.83 billion.

Analyst Ratings: There are mostly holds on the stock with 10 of 14 analysts surveyed giving that rating.

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