On Sep 27, 2016, we issued an updated research report on Legg Mason, Inc. (LM - Analyst Report) . The company’s top-line growth, supported by its strategic acquisitions, seems encouraging. However, the absence of improvement in investment management performance poses concern.
Legg Mason’s continuous acquisitions over the last few years, driven by a strong liquidity position have helped the company diversify its product offerings, expand its market share globally and boost its AUM growth prospects. In line with its long-term strategy of providing investors with choices “across investment capability, product and vehicle, and distribution,” the company acquired a majority stake in Financial Guard LLC, in Aug, 2016.
Moreover, the company’s cost saving measures should aid in bottom-line growth. Further, for fiscal second-quarter 2017, compensation and benefits ratio is expected to decline to the range of 52% to 54%, from 55% recorded in the fiscal first quarter. For fiscal 2017, comp ratio is expected to decrease into the range of 51% to 53%.
However, Legg Mason experienced equity outflows over the last several years with the trend continuing in fiscal first-quarter 2017 as well. In the absence of improvement in investment management performance, the company might suffer from continuous equity AUM outflows, thereby posing a threat to achieving steady overall net inflows
Further, regulatory headwinds and a low interest rate environment may affect its money market fund business, thereby impacting profitability.
Shares of Legg Mason have gained approximately 18.9% in the past three months.
Over the past 30 days, the Zacks Consensus Estimate has been revised upward by nearly 1% to $2.24 per share for fiscal year 2017.
Currently, Legg Mason carries a Zacks Rank #3 (Hold).
Other stocks to consider
Some better-ranked stocks in the finance space include Apollo Global Management, LLC (APO - Snapshot Report) , Virtus Investment Partners, Inc. (VRTS - Snapshot Report) and BlackRock, Inc. (BLK - Analyst Report) .
Apollo Global witnessed a significant upward earnings estimate revision over the past 60 days. Its share price has risen 10.4% in the past six months. It currently carries a Zacks Rank #1 (Strong Buy).
Virtus Partners currently carries a Zacks Rank #1. Over the past 60 days, its Zacks Consensus Estimate has been revised 2.3% upward. Its share price has increased 27.7% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
BlackRock carries a Zacks Rank #2 (Buy). It has witnessed an upward earnings estimate revision of 0.3% over the past 60 days, while its share price is up 8.86% in the past six months.
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