Record quarter at Legg Mason

Profit hits $26.6 million as revenue rises 17.4%, tops $1 billion for year

Earnings

May 06, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

Legg Mason Inc. made a record $26.66 million in its fiscal fourth quarter, driven by a growing asset-management business, and revenue for the year zoomed past $1 billion, the company said yesterday.

Legg Mason's net income rose 13.3 percent in the fourth quarter that ended March 31, compared with $23.52 million in the corresponding period a year earlier. The company made a record 45 cents per diluted share, up 13 percent from 40 cents in the year-earlier period.

For the year, Legg Mason made $95.54 million, up 25.5 percent from $76.12 million for the corresponding period in 1998. Diluted earnings per share increased 23.7 percent, to $1.62 from $1.31.

"To come through a year up 23.7 percent when most of the industry had a year that was flat to down is terrific," said Raymond A. "Chip" Mason, chairman and chief executive of the Baltimore-based brokerage and money management firm.

The earnings beat Wall Street estimates for the quarter by 2 cents a share, according to Zacks Investment Research, which surveyed two analysts.

Shares of Legg Mason fell 87.5 cents yesterday to $33.8125.

"It's another quarter of strong and stable earnings," said Michael A. Flanagan, an analyst at Philadelphia-based Financial Service Analytics. "There is some real strength in these numbers."

Revenue rose 17.4 percent in the quarter to $289.1 million, compared with $246.3 million in the year-earlier quarter.

For the year, revenue climbed to $1.046 billion, a 17.7 percent increase over revenue of $889 million in the prior year.

"We are no longer a small company," Mason said. "Across the board, we are much bigger. We are really an international player in the asset-management business."

While the company's growth has been strong, Mason said he is looking for acquisitions.

"We have a couple of smaller ones we will probably make," he said. "Whether we do anything of significance, I don't know. We certainly will continue to look."

Mason said the company plans to offer online trading to clients possibly by fall. But it is a business he does not like because it runs contrary to Legg Mason's philosophy, which is investing for the long term.

"This is not a business we really want to be in," Mason said. "We are in the advice business. We don't want the day traders."

Like other brokerages and mutual fund companies, Legg Mason is thriving as investors pump money into their products. T. Rowe Price Associates Inc., for example, said total assets under management in its mutual funds surpassed $100 billion this week for the first time. Price reported in January that its revenue and net income reached record levels in the fourth quarter.

Legg Mason's performance was driven by fees generated from its investment advisory business and by its brokerage operations. The company has built, over the years, its investment advisory business, making it less dependent on clients' buying and selling stocks, a business that can suffer when markets fall.

Investment advisory revenue rose 30.7 percent in the quarter to $111.1 million, and it increased 32 percent for the year to $390.2 million.

Revenue from commissions totaled $78 million in the quarter, up 20 percent, and it rose 15.7 percent to $279.1 million for the year.

Total assets managed by Legg Mason jumped 25 percent to $89 billion, compared with $71 billion a year earlier.

Pub Date: 5/06/99

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