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Merrill earnings surprise
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January 19, 1999: 10:59 a.m. ET
Brokerage posts better-than-expected 4Q, although net is below year ago
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NEW YORK (CNNfn) - Merrill Lynch & Co. surprised Wall Street Tuesday by reporting fourth-quarter earnings well above the consensus of analysts' estimates, although the figures aren't as good as those of the prior year.
Despite the positive earnings surprise, Merrill Lynch (MER) stock is down 13/16 to 71-9/16 in Tuesday morning trading.
The company says diluted per-share net for the final three months of 1998 was 86 cents, down from $1.15 a year earlier. The latest figure was above the 64 cents a share consensus estimate of analysts surveyed by First Call.
Net earnings for the quarter declined 24 percent to $349 million from $459 million in the 1997 period.
For all of 1998, Merrill Lynch earned $1.3 billion, or $3 a diluted share, down from $1.9 billion, or $4.79, in 1997. The 1998 figure includes about $293 million in charges due to staff reduction expenses and an accounting change.
The New York-based brokerage says fourth-quarter net revenue rose 2 percent to $4.08 billion from $4.01 billion a year earlier. The increase was due primarily to increased asset management, portfolio service fee and commission income, as well as near record fees for strategic services.
The gain was tempered by a 66 percent decline in principal transaction revenue to $211 million. The company says debt trading revenue remains under pressure, due in large part to losses in corporate and high-yield bonds and mortgage-backed securities.
Merrill says its cost-containment program has already started paying off, reducing fourth-quarter expenses other than employee compensation by 17 percent from the third quarter ended Sept. 25. The company says the savings were in excess of its target.
The brokerage also says staff reductions announced in October as part of its cost containment effort are on schedule, with savings from the cuts expected to be realized in 1999.
"We are continuing to create exceptional long-term value for our shareholders and clients by investing to build a premier global brand in financial services," say company chairman David Komansky and president Herbert Allison Jr. in a statement. "We've never been in a better position to help our clients and shareholders capitalize on the significant opportunities presented by a more fully integrated and open global economy."
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Merrill Lynch
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