Big acquisitions come with risks. Case in point: Generally well-respected asset manager Legg Mason
With such a sizable acquisition, the year-over-year comparisons go a bit haywire. Reported revenue rose 141%, income from continuing operations rose 76%, and net income rose 28% from last year. Likewise on the makeup of the asset growth -- advisory fee revenue and distribution revenue were both considerably higher than in the year-ago period.
All those numbers aside, the company did miss the published estimate by a double-digit margin. The biggest culprit was costs -- compensation expense rose nearly 117% on a year-over-year basis and distribution expenses were about 291% higher. And as management itself said on the call -- cost savings from the deal have thus far been "minimal." Growth in assets under management was also a little pokey. Net customer inflows were just $1.6 billion, and total assets grew about 2% to over $868 billion.
None of this is especially good news, but I think it needs to be looked at in a larger context. After all, this has been a high-performance management team that has generated substantially better returns than its average peer company. So unless you think management went down to Baltimore's Inner Harbor, slipped on a crabcake, and hit their collective heads, I'm inclined to think of this process as mere growing pains.
It doesn't automatically follow, though, that I'm a huge fan. I think long-term trends in private savings and retirement planning favor companies such as Janus
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
