Legg Mason profit up 12% Firm pleased by results, although market ends its string of records

'Exceptional' performance


October 16, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

Wild swings in the stock market ended Legg Mason Inc.'s string of record earnings, but the company still made money, with net income rising 12 percent for its second fiscal quarter, compared with the same period last year.

The tough conditions dashed hopes for a sixth-consecutive record quarter at the Baltimore-based brokerage and money management firm.

"Certainly, we never anticipated nonstop consecutive quarters," said F. Barry Bilson, Legg Mason's chief financial officer. "We are exceptionally pleased with the quarter in light of the difficult market that has faced us over the past few months."

Legg Mason's revenue jumped 12 percent to $247.6 million in the quarter ended Sept. 30, compared with $220.9 million for the same period a year earlier.

The firm made $21.7 million in the quarter, compared with $19.3 million for the 1997 period. Diluted earnings per share rose 12 percent to 37 cents, which was 4 cents short of analysts' expectations, according to Zacks Investment Research.

Michael Flanagan, a brokerage analyst at Philadelphia-based Financial Service Analytics, said his colleagues expected Legg Mason to have another record, despite the significant drop in the value of many stocks.

"I feel [the estimates] were made in a vacuum," Flanagan said. "The fundamentals for the business, even the retail business, did not support such optimistic expectations."

Shares of Legg Mason rose $1.9375 to $22.375.

Flanagan said Legg Mason's performance was "exceptional in a dismal environment."

He said big New York brokerage firms are releasing revenue figures that are down as much as 40 percent from the prior year largely because stock markets are uncertain and overseas investments are going sour.

The largest U.S. brokerage, Merrill Lynch & Co. Inc., reported its first quarterly loss this week in almost nine years and said it would lay off 3,400 people to restore profitability.

Bilson said Legg Mason isn't planning to cut employees, but it is looking "close and hard at all our cost items." He said it has "tightened up dramatically on hiring in all areas of the firm."

For the first six months of its fiscal year, Legg Mason's revenue jumped 22 percent to $496.3 million, and net income rose 30 percent to $46 million compared with the 1997 period.

Legg Mason made 78 cents per diluted share for the first half of the year, up 26 percent from the same period a year earlier.

Despite the tough conditions, Legg Mason's assets under management rose to a record $74.8 billion, up 45 percent from a year earlier.

Legg Mason relies on its money-management business to weather downturns in the stock market.

Second-quarter revenue from the investment-advisory business was $93.3 million, up 31 percent from a year earlier, and it accounted for 38 percent of Legg Mason's total revenue.

Revenue from the firm's brokerage activities was up 4 percent to $88 million, while investment banking revenue fell 36 percent to $16.2 million, compared with the same period last year.

Pub Date: 10/16/98

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