On Apr 9, we upgraded asset management firm, Legg Mason Inc. (LM) to Outperform based on its improved performance. Legg Mason, which focuses on the growth and preservation of its clients' capital through its proprietary mutual funds and separately-managed accounts, has been recording liquidity and equity inflows since the beginning of 2013.
Moreover, with the closure of the acquisition of London-based fund-of-hedge-funds firm - Fauchier, the company is headed toward global expansion.
Why the Upgrade?
Legg Mason is expected to announce its fiscal fourth-quarter 2013 results on Apr 29. The Zacks Consensus Estimate for the quarter is pegged at 61 cents per share. The Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Legg Mason is +32.79% for the fourth quarter. This, along with its Zacks Rank #3 (Hold), makes it likely for the company to report a positive earnings surprise.
Over the past 90 days, the Zacks Consensus Estimate for fiscal 2013 jumped 77.6% to $2.77 per share and the Zacks Consensus Estimate for fiscal 2014 increased 28.8% to $2.86 over the same period.
In Mar 2013, Legg Mason and its affiliate, Permal Group, completed the acquisition of London-based fund-of-hedge-funds firm - Fauchier Partners from BNP Paribas Investment Partners. The acquisition is anticipated to be accretive to Legg Mason's earnings in the first year and demonstrates the company’s aim of providing exceptional services to its clients.
Also, Legg Mason reported strong fiscal third-quarter 2013 results, significantly outpacing the Zacks Consensus Estimate. Higher top-line growth, aided primarily by improved investment advisory fees and other revenues acted as a tailwind for the quarter. However, elevated operating expenses acted as a dampener.
Other Stocks to Consider
Besides Legg Mason, other stocks in the same sector that are currently performing well include Apollo Global Management, LLC (APO) with a Zacks Rank #1 (Strong Buy), Franklin Resources Inc. (BEN) and Invesco Ltd. (IVZ) with a Zacks Rank #2 (Buy).
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