Legg says it'll miss quarterly estimates

Profit shortfall is 3rd since Citigroup deal

October 11, 2006|By Meredith Cohn | Meredith Cohn,Sun reporter

Legg Mason Inc. said yesterday that it would miss analysts' consensus earnings estimate by at least 14 cents a share in the latest quarter, the third time in a row that the Baltimore-based money manager would disappoint Wall Street since acquiring the asset-management business of Citigroup last year.

The news sent the stock tumbling more than $10 in after-hours trading. Shares had closed yesterday at $105.31 in regular trading on the New York Stock Exchange. Legg shares reached an all-time high of $136.40 in February.

The announcement came as Legg has faced increased scrutiny in its efforts to absorb the asset-management business acquired from Citigroup Inc. last year in a $3.7 billion deal. Legg executives have been under pressure to deliver promised savings from eliminated jobs and operations.

Company officials acknowledged the acquisition was hurting Legg's earnings. They said the process of integrating the two operations has been a huge undertaking, although they said yesterday that those plans remain on schedule and they expect to "achieve the previously announced cost savings."

The Citigroup deal doubled Legg's size and expanded its footprint globally. It's now the world's fifth-largest money manager.

Analysts expected earnings of $1.16 a diluted share for the fiscal second quarter that ended Sept. 30. But Legg said net income would be 96 cents to $1.02 a share, or $138 million to $148 million. It also said earnings were off because revenue fell when more bonds were added to its mutual funds, which bring in lower fees, and it had an unanticipated $12 million distribution fee expense. Legg will report full earnings Oct. 24.

meredith.cohn@baltsun.com

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