Legg Mason profit soars

Earnings rise 82% as revenue climbs 32% in third quarter

Earnings

January 19, 2000|By Bill Atkinson | Bill Atkinson,SUN STAFF

Legg Mason Inc. reported blockbuster third-quarter numbers yesterday, with profit and revenue soaring 82 percent and 32 percent, respectively.

The Baltimore asset manager and brokerage posted profit of $33.3 million in the three months that ended Dec. 31, compared with $18.3 million in the third period of 1998.

Earnings per diluted share were 55 cents, compared with 32 cents a year earlier, exceedings analysts' estimates of 49 cents.

Revenue in the quarter rose to $342.7 million, from $260.5 million in the corresponding quarter in 1998.

"Legg Mason had terrific results," said Michael A. Flanagan, an analyst at Financial Service Analytics Inc. in Philadelphia.

"Their straightforward and uncomplicated strategy has really kicked in. That very same strategy is capable of carrying Legg Mason even further."

Shares of Legg Mason rose $1.125 yesterday to $39.3125 on the New York Stock Exchange.

Legg Mason's performance was fueled by another robust year in the stock market.

Assets under management increased 27 percent, reaching $104.2 billion during the past nine months, up from $82.2 billion a year ago. In the third quarter alone, assets rose $9.3 billion, aided in part by Legg Mason's acquisition of Johnson Fry Holdings PLC, a London mutual fund manager that had $1.6 billion under management.

"You just hope it [the performance] continues," said Raymond A. "Chip" Mason, chairman and chief executive officer of the 101-year-old company.

"You can't say any more than that. The asset side was very strong, the brokerage commission side was extremely strong."

Revenue generated by Legg Mason's investment advisory business increased 43 percent in the quarter to $136.5 million. Commission revenue from brokerage operations rose 32 percent to $92.6 million.

The brokerage unit's results pleased Mason, who said there has been much speculation that online stock trading operations would steal business from traditional brokers.

"They keep telling us the broker has died and we keep setting records," he said.

Legg Mason's biggest disappointment was the performance of its investment banking business. Revenue sagged to $11.77 million in the quarter, down 41.1 percent from the corresponding period a year earlier.

Many technology companies are going public, and many of the deals have been won by New York and niche firms, Mason said. He said the firm is working to improve its investment banking business.

"We are just not there. I think we are close," he said.

For the first nine months of its fiscal year, Legg Mason's revenue rose 27 percent to $958.9 million, compared with $756.9 million in the corresponding period in 1998.

Profit rose 46 percent to $94.5 million from $64.5 million in the 1998 period, and diluted earnings per share increased by 39 percent to $1.56 from $1.12.

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