Legg Mason's earnings rise 65% Stock is down despite 2nd straight quarter of record profits


July 19, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

Riding the coattails of a booming stock market, Legg Mason Inc.'s earnings soared 65 percent, setting a record for its first fiscal quarter, the company said yesterday.

It was the second quarter in a row that Legg Mason has reported record operating results.

The Baltimore-based brokerage and investment banking firm's earnings jumped to $12.9 million, or 80 cents a share, in the quarter ended June 30, up from $7.8 million, or 55 cents a share, in 1995.

Revenues were $148.8 million, up 28 percent from the $116 million last year.

But the stock market didn't reward Legg Mason for its performance. The stock closed down 12.5 cents at $30.50 a share.

"By all measures, Legg Mason had a terrific quarter," said Michael Flanagan, a securities analyst with Fort Washington, Pa.-based Financial Services Analytics Inc. "As the numbers suggest, the strength was across the board."

Legg's profits were driven in part by brokerage commissions, which grew to $47.6 million, up 27 percent from 1995. Fees from its investment advisory business were up 31 percent to $42.5 million, and the company's investment banking operations earned $14.1 million, up 54 percent.

Expenses, which were driven largely by increased brokerage commissions, climbed to $126.9 million, up 23 percent from a year ago.

"The favorable climate has helped most of our businesses grow and strengthen," said Raymond A. "Chip" Mason, chairman and chief executive.

Flanagan said Legg Mason could still perform well even if the stock market continues to weaken because the company doesn't hold large amounts of stock in inventory, which can hurt a brokerage firm if the market falls.

He also noted that Legg Mason is repositioning itself by acquiring asset management companies to diversify away from the cyclical stock market.

"The advantage Legg Mason has [over other brokerage firms] is that it has postured its business with as little risk as possible," Flanagan said.

Baltimore's large brokerage firms, which include Legg Mason, T. Rowe Price Associates Inc. and Alex. Brown Inc., have benefited from the stock market's march upward.

But in recent weeks the market has jolted investors by sudden, steep drops. The change could threaten the robust earnings recorded by these companies.

"In this industry, one can never slip into a a euphoric state," said F. Barry Bilson, Legg Mason's chief financial officer. "In this industry, it is impossible to predict whether tomorrow will be a great securities day or a terrible one."

Pub Date: 7/19/96

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