On Sep 15, 2014, we issued an updated research report on Legg Mason Inc. (LM). Robust top-line improvement and effective cost control continued to be the growth drivers, while net outflows remained the dampener.
Legg Mason’s exclusive focus on asset management along with its international presence has assisted it in enhancing revenue generation. This could be witnessed in the first quarter of fiscal 2015, which reflected a rise in total revenues. Moreover, the global asset management firm’s growth was further supported by prudent expense management attained through a consistent streamlining of businesses.
Along with the commendable organic growth strategy, Legg Mason has been concentrating on expanding its operations via acquisitions. The company is amid several beneficial deals such as acquisition of international equity specialist firm Martin Currie and New York-based private asset manager QS Investors, which are expected to augment development after their completion.
Moreover, Legg Mason continues to attract investors’ attention through its strong capital deployment activities. With a steady stock repurchase program in place and frequent hikes in dividend, the company’s success in gaining market confidence was evident from the 16.9% year-to-date increase in share price.
On the flip side, the equity assets under management outflows continued to keep the company’s profitability under pressure. These persistent outflows keep us apprehensive as an absence of credible improvement in the company’s investment management performance reflects no relief in the near term.
Though Legg Mason has the potential to capitalize on available opportunities on the back of a healthy capital position and diversified product mix, slow economic recovery and elevating regulatory pressure are bound to weigh on its financials.
This can also be observed in the Zacks Consensus Estimate for 2014 and 2015, which remained flat over the last 30 days.
Currently, Legg Mason carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked finance stocks include AllianceBernstein Holding L.P. (AB), Monroe Capital Corp. (MRCC) and SEI Investments Co. (SEIC). All these stocks sport a Zacks Rank #1 (Strong Buy).
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