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Can Performance Fees Boost Legg Mason's (LM) Q3 Earnings?
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Legg Mason Inc. is scheduled to report third-quarter fiscal 2018 (ended Dec 31) results on Jan 24, after the market closes. This asset management company is expected to benefit from a significant rise in performance fees, while distribution and service fees, and other service revenues may show deterioration.
Given the expected increase in assets under management during the quarter (the Zacks Consensus Estimate of $764 billion indicates a 7.6% year-over-year increase), Legg Mason’s performance fees are projected to improve significantly. The Zacks Consensus Estimate for performance fees of $37.50 million reflects 63.8% growth from the prior-year quarter. Further, management expects non-pass-through performance fees in the range of $25-$35 million and pass-through performance fees of about $10 million in the to-be-reported quarter.
However, distribution and service fees are anticipated to decline 10% year over year to $81 million. Also, the Zacks Consensus Estimate for other service revenues of $0.84 million indicates a 32.8% plunge from the prior-year quarter.
Overall, Legg Mason is expected to record a rise in revenues. The Zacks Consensus Estimate for revenues of $764.42 million implies a 6.9% year-over-year increase.
On the cost front, management expects compensation ratio to be down in the range of 52-53%, reflecting seasonal decline. Further, we expect overall operating expenses to trend downward as the company has its cost control mechanisms in place.
Notably, the Zacks Consensus Estimate for earnings in the to-be-reported quarter has been revised nearly 5% upward over the last 30 days to 84 cents. The consensus estimate reflects a year-over-year improvement of 68%.
Legg Mason’s fundamental strength has helped its shares gain 34.7% in the past 12 months, outperforming the 13.8% growth recorded by the industry. The company also boosts a decent earnings surprise history. It has surpassed the earnings estimates in three of the trailing four quarters, with an average positive surprise of 23.5%.
The chances of Legg Mason beating the Zacks Consensus Estimate in the to-be-reported quarter are high. That’s because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Legg Mason is +0.18%.
Zacks Rank: Legg Mason currently has a Zacks Rank #1 (Strong Buy), which increases the predictive power of ESP.
Stocks That Warrant a Look
Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.
Santander Consumer USA Holdings Inc.’s Earnings ESP is +0.95% and it carries a Zacks Rank of 1. The company is expected to release fourth-quarter results on Jan 31.
T. Rowe Price Group, Inc. (TROW - Free Report) is slated to release results on Jan 30. The company has an Earnings ESP of +1.49% and carries a Zacks Rank of 2.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Can Performance Fees Boost Legg Mason's (LM) Q3 Earnings?
Legg Mason Inc. is scheduled to report third-quarter fiscal 2018 (ended Dec 31) results on Jan 24, after the market closes. This asset management company is expected to benefit from a significant rise in performance fees, while distribution and service fees, and other service revenues may show deterioration.
Given the expected increase in assets under management during the quarter (the Zacks Consensus Estimate of $764 billion indicates a 7.6% year-over-year increase), Legg Mason’s performance fees are projected to improve significantly. The Zacks Consensus Estimate for performance fees of $37.50 million reflects 63.8% growth from the prior-year quarter. Further, management expects non-pass-through performance fees in the range of $25-$35 million and pass-through performance fees of about $10 million in the to-be-reported quarter.
However, distribution and service fees are anticipated to decline 10% year over year to $81 million. Also, the Zacks Consensus Estimate for other service revenues of $0.84 million indicates a 32.8% plunge from the prior-year quarter.
Overall, Legg Mason is expected to record a rise in revenues. The Zacks Consensus Estimate for revenues of $764.42 million implies a 6.9% year-over-year increase.
On the cost front, management expects compensation ratio to be down in the range of 52-53%, reflecting seasonal decline. Further, we expect overall operating expenses to trend downward as the company has its cost control mechanisms in place.
Notably, the Zacks Consensus Estimate for earnings in the to-be-reported quarter has been revised nearly 5% upward over the last 30 days to 84 cents. The consensus estimate reflects a year-over-year improvement of 68%.
Legg Mason’s fundamental strength has helped its shares gain 34.7% in the past 12 months, outperforming the 13.8% growth recorded by the industry. The company also boosts a decent earnings surprise history. It has surpassed the earnings estimates in three of the trailing four quarters, with an average positive surprise of 23.5%.
Legg Mason, Inc. Price and EPS Surprise
Legg Mason, Inc. Price and EPS Surprise | Legg Mason, Inc. Quote
Here is what our quantitative model predicts:
The chances of Legg Mason beating the Zacks Consensus Estimate in the to-be-reported quarter are high. That’s because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Legg Mason is +0.18%.
Zacks Rank: Legg Mason currently has a Zacks Rank #1 (Strong Buy), which increases the predictive power of ESP.
Stocks That Warrant a Look
Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.
Associated Banc-Corp (ASB - Free Report) is slated to report results on Jan 25. It has an Earnings ESP of +0.64% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Santander Consumer USA Holdings Inc.’s Earnings ESP is +0.95% and it carries a Zacks Rank of 1. The company is expected to release fourth-quarter results on Jan 31.
T. Rowe Price Group, Inc. (TROW - Free Report) is slated to release results on Jan 30. The company has an Earnings ESP of +1.49% and carries a Zacks Rank of 2.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>