Lehman Crushes Estimates, Stock Takes a Hit

Lehman Bros. got the investment bank reporting season off to a rollicking start this morning posting profit numbers that were 41% higher than 4Q 2004. The quarterly earnings of $823 million translated into $2.76 a share, handily beating estimates of $2.64. The big driver this quarter was investment banking revenue with a strong showing from investment management as well; principal transaction experienced a drop-off. After peaking in late November, the stock is off another $2 this morning on the news. The market must agree with blogger Crossing Wall Street who described why he’s steering clear of the stock:

So how come I don’t love the stock? It pains me to say this, but I just don’t see the stock going much higher next year. The reason is that Lehman is primarily a bond shop. The company has done a very good job of diversifying over the past few years (Neuberger Berman was a great buy), but bonds are still the heart and soul of the company. With the yield curve so flat, I’m skeptical that the earnings surprises will keep coming.

Lehman’s Net Income Surges [Wall Street Journal]

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