The Gory Details on Legg Mason's Double Fumble

Legg Mason (NYS: LM) reported earnings on Jan. 27. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q3), Legg Mason missed on revenues and missed expectations on earnings per share.

Compared to the prior-year quarter, revenue contracted, and GAAP earnings per share contracted.

Gross margins expanded, operating margins contracted, net margins dropped.

Revenue details
Legg Mason tallied revenue of $627.0 million. The 12 analysts polled by S&P Capital IQ expected to see a top line of $655.7 million. Sales were 13% lower than the prior-year quarter's $721.9 million.


Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.20. The 14 earnings estimates compiled by S&P Capital IQ anticipated $0.25 per share on the same basis. GAAP EPS of $0.39 for Q3 were 51% lower than the prior-year quarter's $0.41 per share.


Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 35.8%, 200 basis points better than the prior-year quarter. Operating margin was 10.9%, 570 basis points worse than the prior-year quarter. Net margin was 4.5%, 400 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $653.3 million. On the bottom line, the average EPS estimate is $0.46.

Next year's average estimate for revenue is $2.70 billion. The average EPS estimate is $1.58.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 852 members out of 924 rating the stock outperform, and 72 members rating it underperform. Among 366 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 347 give Legg Mason a green thumbs-up, and 19 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Legg Mason is hold, with an average price target of $29.25.

At the time this article was published Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor ofMotley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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