Baltimore-based Legg Mason Inc. (LM) reported a rise in its assets under management (:AUM) as of Mar 31, 2013, compared with the prior quarter, reflecting the acquisition of Fauchier Partners. Preliminary quarter-end AUM came in at $664.6 billion, up 2.4% sequentially. Equity and liquidity AUM were up in the quarter under review, though Fixed Income AUM declined.
Legg Mason’s equity AUM as of March-end jumped 11.2% sequentially to $161.8 billion while liquid assets, which are convertible into cash, increased about 1.0% to $137.7 billion.
Fixed income AUM dipped 0.5% compared with the prior quarter to $365.1 billion. The rise in equity AUM, partly offset by a fall in fixed income AUM, resulted in long-term AUM of $526.9 billion, reflecting a 2.8% increase against the prior quarter.
Among other investment managers, Invesco Ltd. (IVZ) announced a 2.2% rise in its preliminary month-end AUM for Mar 2013, which stood at $729.3 billion. Another firm - Franklin Resources Inc. (BEN) - declared preliminary AUM of $823.7 billion by its subsidiaries for the month of Mar 2013, reflecting an escalation of 1.2% over the prior month.
We believe Legg Mason has the potential to outperform its peers in the long run, given its diversified product mix and leverage to the changing market demography. However, in the near term, asset outflows will remain a significant headwind. Yet, owing to the restructuring initiatives and the cost-cutting measures, we expect operating efficiencies to improve for Legg Mason and dividend payments to continue to inspire investors’ confidence in the stock.
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 59 cents per share. The Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Legg Mason is +18.64% for the fourth quarter. This, along with its Zacks Rank #3 (Hold), makes us confident for the company to report a positive earnings surprise.
Among other asset managers, we are not confident of an earnings beat from AllianceBernstein Holding L.P. (AB) with an Earnings ESP of 0.00% and a Zacks Rank #1 (Strong Buy).
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