On Mar 15, we reiterated our Neutral recommendation on
Legg Mason Inc.
) based on its rising top-line and healthy capital position.
However, rising expenses and higher net client outflows remain
the major causes of concern. Legg Mason carries a Zacks Rank #2
Legg Mason's fourth quarter 2012 earnings came in at 70 cents per
share, significantly outpacing the Zacks Consensus Estimate by 16
cents. Total revenues came in at $673.9 million, up 8% from the
prior-year quarter. Moreover, revenues surpassed the Zacks
Consensus Estimate of $673.0 million.
Over the last 60 days, the Zacks Consensus Estimate for 2013
surged 78%, on the back of upward movement of a number of
estimates. The Zacks Consensus Estimate for 2014 escalated 30%
over the same time frame. Further, an improving investment
advisory income and opportunistic acquisitions helped the company
sustain the Neutral recommendation.
Further, healthy cash position and implementation of the new
capital plan in the first half of the fiscal 2013 are positives
for the stock. Extensive capital deployment activities also
continue to reinforce investors' confidence in the stock.
META FINL GRP (CASH): Free Stock Analysis
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LEGG MASON INC (LM): Free Stock Analysis
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However, the low interest rate environment and changing
regulatory landscape are expected to be the headwinds in the
future. Further, we remain concerned about the asset outflows of
the company. Additionally, we are skeptical about the
continuously rising regulatory expenses, which may temper
profitability in the near-to-mid term.
Other Stocks to Consider
Other banking stocks that are currently performing better than
Legg Mason include
First Defiance Financial Corp.
Flagstar Bancorp Inc.
Meta Financial Group, Inc.
). All these carry a Zacks Rank #1 (Strong Buy).