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Analyst Blog

Shares of Legg Mason Inc. (LM - Analyst Report) achieved a new 52-week high, touching $49.50 on Mar 31. The stock closed the session at $49.04, reflecting a solid year-to-date return of 14.2%. The trading volume for the session was over 1.9 million shares.

Despite the strong price appreciation, this Zacks Rank #3 (Hold) stock still has upside left, given the positive earnings surprise it delivered in the last reported quarter. Further, the long-term expected earnings per share growth rate for this regional bank now stands at 18.9%

Growth Drivers

Recent acquisitions, global expansion and decent last quarter results – including higher operating revenues and higher assets under management – primarily drove the stock price.

On Mar 4, Legg Mason announced a deal to acquire QS Investors, a leading quantitative equities provider based in New York, with $4.1 billion in assets under management and nearly $100 billion in assets under advisory. As a result of this acquisition, Legg Mason’s existing quantitative equity division will be merged with QS Investors over time.

On Jan 31, Legg Mason came out with fiscal third-quarter 2014 adjusted earnings of $1.03 per share, beating the Zacks Consensus Estimate by 3.0%.
 
Results were aided by a fairly liquid balance sheet, decent top-line growth and an increase in assets under management.

However, a rise in the operating expenses and higher asset outflow were the downside.

Some better-ranked stocks in this space include Calamos Asset Management Inc. (CLMS - Snapshot Report), Fortress Investment Group LLC (FIG - Snapshot Report) and Lazard Ltd. (LAZ - Analyst Report). All these carry a Zacks Rank #1 (Strong Buy).