Legg's fourth quarter its best

$48 million profit tops the forecasts to bring record year

May 09, 2000|By Shanon D. Murray | By Shanon D. Murray,SUN STAFF

Legg Mason Inc. reported yesterday that its fourth-quarter profit almost doubled, substantially beating analysts' estimates and propelling the firm to a record year.

With robust results in all three of its business segments, the Baltimore asset manager and brokerage posted quarterly profit of $48 million in its fourth three-month period, ending March 31, compared with $24.8 million in the fourth period of 1999, a 94 percent increase.

Diluted earnings per share were 78 cents, compared with 43 cents a year earlier, exceeding analysts' estimates of 57 cents.

Net revenue in the quarter rose to a record $370.6 million, from $265.2 million in the corresponding quarter in 1999.

For the year, profit rose 60 percent to a record $142.5 million from $89.3 million in the 1999 period, and diluted earnings per share increased by 50 percent to $2.33. Net revenue rose 30 percent to $1.2 billion, also a record.

Legg Mason Chairman Raymond "Chip" Mason said that while asset management's growth rate outpaced the brokerage's for the year, that the brokerage business propelled fourth-quarter growth. "It is the best quarter we've ever had by quite a margin," Mason said. "I think our next highest quarter was maybe 20 cents a share less." Assets under management increased 26 percent, reaching $112 billion during the quarter, up from $89 billion a year ago, and up 7 percent from the third quarter. "There are good quarters, very good quarters and there are extraordinary quarters, and truly the March quarter belongs in the latter category," said F. Barry Bilson, Legg Mason's senior vice president of finance.

"All three business segments - securities brokerage, investment management and capital markets - had phenomenally strong operating results," he said.

Michael A. Flanagan, an analyst at Financial Service Analytics Inc. in Philadelphia, said Legg Mason benefited more than others in a quarter that was kind to the entire financial industry.

"This quarter showed us what Legg Mason is capable of delivering in a good market environment," Flanagan said.

Revenue generated by Legg Mason's investment advisory business increased 34 percent in the quarter to $149 million. Commission revenue from brokerage operations rose 47 percent to $114.6 million.

Mason said he expects the stock market to continue to be "relatively erratic," with technology stocks remaining under pressure for the near to intermediate term.

Many institutions and individuals have become over-weighted in the sector, either because their stocks gained so much that they have become a bigger part of their investments, or because investors added to positions.

"My guess is they will continue to try and move to a more balanced weighting of their investments," Mason said. "And by doing that, that alone will put pressure on the tech stocks."

Shares of Legg Mason rose 37.5 cents yesterday to close at $37.25.

Bloomberg News contributed to this article.

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