The Gory Details on Legg Mason's Double Fumble

Seth Jayson, The Motley Fool
Updated

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.

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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.

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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 thisarticle 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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