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Lehman 3Q wows Street
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September 20, 2000: 3:19 p.m. ET
Brokerage earns $3.37 per share in fiscal 3Q, dwarfing the $2.75 estimate
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NEW YORK (CNNfn) - Lehman Brothers said Wednesday its third-quarter profits jumped 58 percent, beating Wall Street forecasts and making it the latest brokerage house to report surprisingly strong results.
Lehman Brothers Holdings Inc. reported fiscal third-quarter earnings of $3.37 per share, up from $2.30 a share for the year-earlier quarter. Analysts surveyed by earnings tracker First Call forecast the company would earn $2.75 a share for the quarter ended Aug. 31.
On Tuesday, Goldman Sachs (GS: Research, Estimates) beat estimates by 11 cents and last week Bear Stearns (BSC: Research, Estimates) beat the Street's estimate by 13 cents.
Lehman, the third-largest U.S. brokerage firm, said net income for the quarter rose 58 percent to $457 million from $290 million a year earlier. Revenue rose 51 percent to $2.05 billion from $1.36 billion.
Stocks and bonds trading saw the biggest jump in revenue, more than doubling from the same period a year ago to $1.07 billion.
"The third-quarter and nine-months revenues not only illustrate the balance Lehman Brothers has achieved among its equity, fixed income and investment banking businesses, but also show the financial and strategic potential of new businesses the firm has been building, including private equity and high-net-worth activities," Chairman Richard Fuld said in a statement.
 Lehman also announced a 2-for-1 stock split, further underscoring the strength of a stock that has seen large gains on takeover rumors in the wake of other recent deals in the financial services sector.
This strength continued after many analysts said the company could be the next mid-size brokerage to be gobbled up after Chase Manhattan bought J.P Morgan for $33 billion. Bear Stearns was also mentioned as a target, with Chairman Alan Greenberg acknowledging he would sell, but analysts said such a deal would be quite expensive and Lehman looked more likely.
Such speculation led some analysts to believe Lehman's stock had peaked, with one analyst saying the share price already represents liquidation value.
But Tom Goggins, bank and finance manager of John Hancock funds, said fundamentals should propel Lehman even more.
"The Lehman Brothers report really highlighted the global franchise that the U.S.-based investment banking firms have," Goggins said. "While they very much benefited from the strong IPO market here in the states they also benefited from the strong capital markets in Europe and, as the U.S. firms expand their franchises, they're just getting greater market share."
"We think that there's plenty of upside just on the earnings, not the consolidation story," he said.
Lehman (LEH: Research, Estimates) stock rose in morning trade, but later retreated, falling $1.19 to $143.50. 
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Lehman Brothers
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