Revenue, profit rise at Legg Mason Record levels reached in second quarter

stock gains on news


October 17, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

Aided by a steadily climbing stock market, Legg Mason Inc.'s revenue jumped 45 percent and net earnings rose 36 percent in the second quarter to record levels, the company said yesterday.

Revenue reached $212.9 million in Legg's fiscal second quarter, which ended Sept. 30. This compared with $147.3 million for the same period last year.

Net income climbed to $18.8 million, up from $13.9 million in the same period in 1996. Primary earnings per share rose 24 percent to 72 cents, compared with 58 cents a share in the 1996 quarter.

The share numbers were adjusted for a 4-for-3 stock split in September.

"It was a strong quarter for the industry, and it was a very strong quarter for Legg Mason," said Michael Flanagan, a brokerage analyst with Financial Service Analytics in Fort Washington, Pa.

Legg's shares rose 43.8 cents to close at $54.438.

Legg's stock has shot up more than 90 percent since the beginning of the year. Flanagan, who follows 30 financial services companies, said their shares have risen more than 70 percent this year, well above the 30 percent increase of the Standard & Poor's 500 stock index.

Speculation that many brokerage firms will be acquired by banks has driven prices higher.

"Everybody is a potential target," Flanagan said. "Brokerage fundamentals don't support current valuations. I think prices are just too high."

Nevertheless, performance in the industry has been superb.

Legg's revenue rose 32 percent in the first half of the fiscal year to $392.1 million, up from $296.1 million for the same time a year earlier.

Net income increased 29 percent to $34.6 million, or $1.33 per primary share, up from $26.8 million, or $1.19 per primary share.

"It was a very strong quarter on all fronts, better than we could have ever expected at the beginning of the quarter," said John F. Curley Jr., Legg's vice chairman. "There is nothing on the horizon that says strong results shouldn't continue, but we have been fooled before."

Every segment of the Baltimore firm's brokerage and investment banking business hummed.

Revenue from stock trading commissions surged 53 percent in the quarter to $63.9 million and accounted for 30 percent of the company's revenue.

Investment advisory revenue was up 47 percent to $63.2 million. Through its investment advisory business, Legg manages $51.7 billion for individuals, institutions and mutual fund clients, up 36 percent from $37.9 billion a year earlier.

Investment banking revenue, generated mainly from corporate finance deals, rose 35 percent to $25.2 million.

Legg's expenses also rose to $180.8 million in the quarter, up 45.7 percent. The increase was largely due to compensation and benefits, which jumped 45.7 percent to $120.6 million, up from $82.8 million the same time a year earlier.

The increase didn't bother Flanagan.

"Expenses were well under control in the quarter," he said.

Pub Date: 10/17/97

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