Profits Soar at Morningstar

Third-quarter revenue rises 22% from a year ago.
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Investment research provider

Morningstar

(MORN) - Get Report

saw its third-quarter earnings jump 83% due to strong sales of products targeted toward financial advisers.

Chicago-based Morningstar, which went public last spring, earned $7.5 million, or 17 cents a share, in the third quarter, up from $4.1 million, or 10 cents a share, a year earlier. The company reported revenue of $56.9 million for the quarter, a 22% increase from last year.

According to Thomson First Call, the lone analyst covering the company was expecting a profit of 19 cents a share.

Chairman and CEO Joe Mansueto said two of Morningstar's key products, Morningstar Advisor Workstation and Investment Consulting, made the largest contributions to revenue growth this quarter. Revenue from Advisor Workstation Enterprise Edition, which is offered to financial advisers affiliated with large firms, benefited from continued growth in license agreements over the past several quarters.

Revenue in Morningstar's individual segment was $15.5 million in the third quarter, up from $12.7 million in the year-ago period, the company said. The increase partly reflects the favorable impact of revenue associated with the Global Analyst Research Settlement, which the company recognized for three months in the latest third quarter vs. only two months last year.

The company's revenue in the adviser segment was $18.6 million, a 21% increase from $15.4 million in the same period in 2004. Revenue in the institutional segment was $24.1 million, a 20% increase from $20.1 million in the prior year, the company said Wednesday.

Morningstar's international operations had revenue of $7.5 million, up 19%. Foreign currency translations contributed $300,000 of the increase, according to the company.

Elsewhere, the company's operating margin grew to 21.7% in the third quarter from 14.2% in the same quarter last year. For the year to date, the company said it has generated $26.3 million in free cash flow vs. $13.3 million in the comparable period a year ago. Third-quarter free cash flow was $16.9 million.

Morningstar shares were falling 84 cents, or 2.4%, to $34.20 Wednesday morning.