Wednesday, March 15, 2006

Analysts React to Robust Lehman Quarter

Robust fixed income trading and record global M&A activity helped Lehman Bros (LEH) report a smoking 24% jump in first-quarter earnings.

Tuesday, you'll recall, IB killer whale Goldman Sachs (GS) reported that its net income for the quarter popped more than 60% and set a record for any broker's quarterly profit. Goldman at less than 12x forward earnings is a sick joke: buy the stock.

A bevy of Wall Street analysts reacted to Lehman's cheeerful news:
JP Morgan -- "These were very solid results, with records in every business segment and region, just not in the same league as the blow-out results delivered yesterday by Goldman. Keep in mind, matching GS's outperformance was unlikely, in our view, given LEH's lack of meaningful exposure to commodities/ currency trading and much lower exposure to alternative assets (roughly 10% of GS's size)."

Prudential Equity Group -- "Results reflected quarterly record revenues in each business line and region, and record net income for the firm. We believe that consensus estimates are too low and need to increase. This quarter, Lehman showed that it can produce solid results even with weaker U.S. mortgage originations in our view."

Morgan Stanley -- "Lehman continues to shrug off the weaker mortgage environment, producing strong results in the first quarter, but likely not strong enough to add to the move the stock had yesterday on the back of the Goldman Sachs quarter in our view."
Bear Stearns (BSC) steps up to the plate tomorrow at 10AM. Among the four IB giants we follow (MER, GS, LEH, and BSC, Bear is our least favorite). We'll have a report on Bear for you sometime this week.

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