Sterne Agee has some bad news for Legg Mason [see profile]. Today a Sterne Agee analyst, Jason Weyeneth, released a report lowering his rating of the Baltimore-based mutual fund firm from "neutral" to "underperform."

"We continue to believe LM will struggle to post meaningful growth in AUM or revenues absent a sizable equity market rally," Weyeneth wrote. "We believe the company is still a long way from generating material net inflows which we believe are necessary for meaningful relative multiple expansion."

Mary Athridge, a spokeswoman for Legg Mason, declined to comment on Weyeneth's move.

Weyeneth also dropped his price target for Legg Mason's stock from $36 to $32 per share, and he lowered his estimates of the fund firm's future earnings: from $1.83 to $1.64 per share for fiscal 2012 and from $2.50 to $2.30 for 2013. 

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