Ticonderoga Upgrades Legg Mason (LM) to Neutral; Affiliates Improving, Well Owned for Restructuring

Ticonderoga upgraded Legg Mason (NYSE: LM) from Sell to Neutral.

Ticonderoga analyst says, "The ratings revision is reflective of three factors. One, we are growing more encouraged with the outlook for Permal, LM’s fund of funds manager. Two, improvements in Permal and the broader equity market continue to drive higher revenue yields, which are more than offsetting the absolute level of outflows. Third, we have to admit that GAAP valuations are proving meaningless for LM. Note, our future estimates exclude estimated transition costs."

"We believe the presence of Nelson Peltz, KKR, and a renewed focus on cash earnings have helped the market to re-value LM on this more favorable metric. Under this focus, almost any near-term expense burden is rewarded if it increases “run rate” cash earnings. We worry that some of these measure may not be the most optimal long-term use of cash but do raise forward earnings now."

For more ratings news on Legg Mason click here and for the rating history of Legg Mason click here.

Shares of Legg Mason closed at $37.27 yesterday.

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