Lehman Brothers (LEH) Earnings Shrug off Credit Crunch

Lehman Bros reported earnings today and showed by the credit crunch is only part of the picture. Third quarter net income fell by 3.2% as the wrote off half a billion dollars in fixed income securities. But the company's overall revenue rose 3%, fueled by the firm's equity business. It global diversification also helped to reduce its exposure to the US mortgage melt-down.

Lehman Bros reported earnings today and showed by the credit crunch is only part of the picture. Third quarter net income fell by 3.2% as the wrote off half a billion dollars in fixed income securities. But the company’s overall revenue rose 3%, fueled by the firm’s equity business. It global diversification also helped to reduce its exposure to the US mortgage melt-down.

The company’s CFO told conference call listeners that “barring any unforeseen circumstances, we feel that the worst of this credit correction is behind us."

Its earnings of $887 million or $1.54 a share handily beat analysts estimates of $1.47 a share.

Whether other investment banks will show the same inoculation to the credit crunch remains to be seen. Both Goldman Sachs and Morgan Stanley were up almost 5% on the news.

But Lehman is showing that while the credit crunch was a big story, the overall economy was strong and credit problems are not stalling the economy.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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Comments

  • Ana Halston

    September 19, 2007

    LEH is a solid white shoe institution with some of the smartest guys on the planet. It was stunning to see the shorts gain steam beating it down to lows I never thought possible for an A+ global company....they keep talking about screwed up? companies who did well, like LEH, with the exception of mat.the one big problem left. They are overestimating GS, but who knows...MS who can say...they are all global unlike BSC. The feds are killing the dollar, the equities soar beyond old highs like fcx, while gold makes 20 year highs...is scarey to me to see this volatility. In the meantime the FXI soars and to the blue skies. I am sticking with LEH, they are doing plenty of business and will do even better. Deals that do not work, they will back out of, and others will come that DO work. Its still undervalued in my opinion. So is GS. I dont like seeing gold fly to 1000 and gas to 100. I sure cannot afford those prices, then we have wheat, along with corn so that American food is going to be too expensive for Americans to buy. Bernake is more like partners with the boys on the street. Balance sheets are strong or not, depending on where you look. I see RIO with huge debt at all time highs, and MT stretching up. The infrastructure would be my #1 along with brokers. MDR, JEC, CBI ITW are all good ones for the future. BX is the one stock I would stay away from. Steve Schwartzman and other BX executives already took his $400MM bonus, putting the company he took public in debt. What is that? Greed? FCX is still undervalued, though its gotten too volatile for me, as I would not want to see another drop to 70 from 100...that is just nuts.

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