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Bright Quarter for Morningstar

The stock surges 10% as the research provider posts sharp earnings and revenue gains.

Investment research provider


(MORN) - Get Morningstar, Inc. Report

surged 10% Wednesday after posting sharp second-quarter gains.

Best known for its mutual fund ratings, Chicago-based Morningstar, which went public earlier this year, earned $9.5 million, or 22 cents a share, compared with $1.3 million, or 3 cents a share, in the second quarter of 2004. The company reported consolidated revenue of $56.2 million, a 30% increase from revenue of $43.2 million last year.

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"Our revenue growth was strong in all three of our business segments, with the largest contribution coming from our Individual segment. This increase mainly reflects new revenue from the independent equity research we're providing under the Global Analyst Research Settlements," said CEO Joe Mansueto.

Morningstar began providing research to five major investment banks under the settlement terms during the third quarter of 2004. Morningstar's year-over-year comparison was highly favorable because the company did not begin to recognize revenue for this business until then.

Revenue in Morningstar's individual segment was $15.6 million in the second quarter of 2005, a 57% increase from the second quarter of 2004. Revenue in its adviser segment was $18.8 million, a 16% increase. Revenue in the institutional business was $23 million, up 21%.

Revenue from international operations was $7.1 million in the second quarter of 2005, a 17% increase from $6.1 million in the second quarter of 2004.

Excluding stock-based compensation expense, the company's operating margin was 26.8% in the second quarter of 2005, compared with 17.4% in the second quarter of 2004.

Early Wednesday, Morningstar surged $2.69 to $29.91.