Lehman's Earnings Rise, but Market Decline Hits Goldman's Bottom Line
Lehman Brothers
(LEH)
and
Goldman Sachs
(GS) - Get Report
posted quarterly earnings today that gave the financial services sector a lift.
Shares of both companies were ticking higher this morning, with Goldman climbing 1.7% to $90.15 and Lehman gaining 7.1% to $72.14. The
American Stock Exchange Securities Broker/Dealer Index
was recently higher by 3.2%.
Lehman reported second-quarter earnings that easily beat analysts' expectations, as strong results from the firm's bond business helped boost the bottom line. Earnings rose to $430 million, or $1.38 a share, compared with $378 million, or $1.39 a share, in the same period last year. Analysts polled by
Thomson Financial/First Call
expected second-quarter earnings of $1.14 a share.
Revenue for the quarter rose to $2.02 billion, up from $1.76 billion in the same period last year, thanks in part to an 18% increase in investment banking revenue.
"Despite continued difficult markets, resulting in an industrywide slowdown in some investment banking activities, the second quarter proved to be among our best ever in terms of net income and revenues," Richard S. Fuld Jr., Lehman's chairman and chief executive, said in a press release.
Goldman's second-quarter earnings and top line fell as a result of lower revenue in the company's investment banking segment and the weaker stock market. Earnings for the quarter totaled $577 million, or $1.06 a share, down from $755 million, or $1.48 a share, in the same period last year. Excluding items, the company earned $1.13 a share. Goldman's latest earnings matched analysts' consensus estimate of $1.06 a share.
"We continue to feel the impact of difficult economic and market conditions, and the near-term outlook remains uncertain," Goldman's chairman and chief executive, Henry Paulson Jr., said in a prepared statement. "The challenging business environment, however, has not lessened the firm's leadership across core businesses, demonstrating the strength of Goldman Sachs' global franchise in good markets and bad."
Goldman's revenue for the quarter fell to $3.99 billion from $4.16 billion in the year-ago period. Revenue in the investment banking segment dropped to $792 million from $1.59 billion amid a 47% drop in the firm's underwriting revenue.
"The stocks are probably going to trade better as they've been under pressure for a week," said Patrick Boyle, head financial trader at
Credit Suisse First Boston
. "
Their earnings were not negative, which is a positive these days."
Bear Stearns
(BSC)
and
Morgan Stanley Dean Witter
(MWD)
will report quarterly earnings later this week. In recent trading, Bear Stearns gained 2.7% to $53.41, and Morgan rose 4% to $59.56.