Legg Mason's profits double in third quarter

January 21, 1992|By David Conn

With the Dow Jones Industrial Average as its inspiration, the investment firm Legg Mason Inc. reached record heights in its third quarter, with profits more than doubling over the same period in 1990.

The Baltimore-based regional brokerage reported profits of $5.8 million, or 58 cents a share fully diluted, for the third fiscal quarter ending Dec. 31. That compares with profits of $2.6 million, or 29 cents a share fully diluted, in the third quarter of 1990. Third-quarter revenues rose 30 percent, to $76.0 million from $58.4 million a year earlier.

Fully diluted earnings count the common stock and othe securities convertible into common stock.

Results for the first three quarters of fiscal 1992 were also higher with earnings up 55 percent to $14.5 million, or $1.47 a share fully diluted, compared with $9.4 million, or $1.01 a share fully diluted, in the same period in 1990.

In the wake of news of Legg Mason's earnings, its stock closed at $25.87 a share yesterday, up 12 1/2 cents from Friday's closing price.

Legg Mason and stock analysts attributed the earnings increase not only to the strong performance of the stock market -- the Dow rose 7.5 percent during Legg Mason's third quarter -- but also to the firm's growing reliance on fee-generating asset management services.

Nearly $11 million of Legg Mason's $76 million in quarterly revenues came from investment advisory services and related fees, up from $9.5 million the year before. That includes Legg Mason's 10 mutual funds, with $2.5 billion under management, and another $8.5 billion in private accounts, according to Vice Chairman John F. Curley Jr.

"One of the good things about our results in recent periods is that a year ago, when the securities industry was having some severe profitability problems," he said, "we remained at reasonable profitability during that period, in part because of the money management business."

John E. Keefe, an analyst with Lipper Analytical Services Inc., said: "The backbone of their revenue structure is their asset management business."

In the latest quarter, Legg Mason didn't need much of a backbone to make a profit, however. Revenues from commissions on securities trading were up 47.5 percent to $28.6 million, compared with $19.4 million in the 1990 third quarter.

That's because the market has been rising, there's new interest from individual and institutional investors, and many companies are issuing stock, Mr. Keefe said.

He and Mr. Curley noted that the industry suffered through an early recession, losing about 20 percent of its work force in the two years after the October 1987 stock market crash.

Three months ending 12/31/91

.. .. .. Revenue.. .. .. .. Net.. .. .. .. .. Share

'91.. ..75,997,000.. .. ..5,776,000.. .. .. .. .0.58

..58,379,000.. .. ..2,621,000.. .. .. .. .0.29

change.. +30.2.. .. .. .+120.4.. .. .. .. ..+100.0

Twelve months ending 12/31/91

.. .. .. Revenue.. .. .. .. .Net.. .. .. .. .. .Share

'91.. ..212,601,000.. .. 14,498,000.. .. .. .. .1.47

..183,965,000.. .. .9,362,000.. .. .. .. .1.01

change.. +15.6.. .. .. .. +54.9.. .. .. .. .. +45.5

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