Legg Mason Inc.
) reported a drop in its assets under management (AUM) as of Jun
30, 2013 when compared with the prior quarter, thereby reflecting
a reduction in foreign exchange AUM. Preliminary month-end AUM
came in at $644.5 billion, down 3.0% from the prior quarter.
Equity AUM rose while fixed income and liquid AUM declined.
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Legg Mason's equity AUM as of June-end rose 1.6% from the prior
quarter to $164.4 billion, while fixed income AUM fell 3.9% to
$351.0 billion from the prior quarter figure.
The fall in fixed income AUM, partially offset by increased
equity AUM resulted in a long-term AUM of $515.4 billion,
reflecting a 2.2% decrease against the prior quarter. Liquid
assets, which are convertible to cash, fell about 6.2%
sequentially to $129.1 billion.
We believe that Legg Mason has the potential to outperform its
peers in the long run, given its diversified product mix and
leverage in the changing market demography. Moreover, a
significant rebound in equity markets would act as a
catalyst. However, in the near term, asset outflows will remain a
significant headwind. However, owing to the restructuring
initiatives and cost-cutting measures, we expect operating
efficiencies to improve for Legg Mason and dividend payments to
continue boosting investors' confidence in the stock.
Other Stocks to Consider
Legg Mason is scheduled to announce fiscal first-quarter 2014
results on Jul 25. The earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) for the quarter is -2.50%. This, along with its Zacks Rank #5
(Strong Sell), reduces the company's chances of a positive
Though we are not optimistic about Legg Mason's earnings, there
are many financial companies that are likely to beat earnings
this quarter. Here are some stocks that are worth a look as our
model shows them to have the right combination of elements to
post an earnings beat this quarter:
Prosperity Bancshares Inc.
) with earnings ESP of 1.14% and a Zacks Rank #2 (Buy).
First Horizon National Corporation
) with earnings ESP of 5.26% and a Zacks Rank #3 (Hold).
Fifth Third Bancorp
) with earnings ESP of 2.27% and a Zacks Rank #3.