Barclays Sees Value In Legg Mason As Performance Trends Continue

Barclays is staying the course on its Overweight rating on Legg Mason, Inc. LM saying the company appears poised to build on recent improved momentum in the coming months.

Legg Mason reported a quarterly GAAP EPS of $0.31 compared to Barclays' estimate of $0.27 and consensus of $0.25. Total revenues were in line with Barclays, while expenses were a little higher than its model.

The London-based Barclays noted that performance trends continue to improve in struggling affiliates, such as Royce & Associates, and flows remain strong in affiliates like Western Asset Management.

Regarding Western, Barclays said management highlighted positive trends on the institutional and retail side, seeing strong market share gains last quarter. Overall, the outlook remains strong as unfunded wins remain at nearly $9 billion.

"We expect fiscal second quarter 2017 to build off the first quarter trajectory as LM benefits from its improving performance and strength in fixed income in an uncertain market," analyst Kenneth Hill wrote in a note.

However, Hill said there are still many moving parts as the company works its way through integration efforts.

Legg Mason's price target is still $41, but the brokerage cut the company's fiscal 2017 EPS estimate to $2.15 from $2.38, and fiscal 2018 EPS forecast to $3.36 from $3.40.