Bear Stearns Misses Badly

Bear Stearns reported a 61% drop in third-quarter net income to $171.3 million, or $1.16/share, much worse than the Street's forecast of $1.78/share. Bear's 37.5% decline in revenue to $1.33B, also widely missed estimates of $1.64B. In a statement, Bear cited "extremely challenging" market conditions for both the mortgage and credit businesses. Bear said revenues and asset values suffered "significant reductions" due to "a general repricing of risk in the market." "Bear Stearns is in the worst shape on Wall Street because it has the most exposure to fixed income and least to international markets," commented S&P analyst Matt Albrecht. Bear's fixed income revenue tumbled 88% to $118M, while investment banking revenues fell 9% to $211M. Bear said Q3 results include $200M in losses and expenses related to its hedge funds. One bright side for Bear was institutional equities net revenues, which jumped 53% to a record $719M. Bear said it has a new $2.5B stock buyback program, which supersedes its previous $2B buyback plan (of which $1.3B had been repurchased). Shares of Bear Stearns were mostly unchanged in pre-market trading, after losing 3% to $115.64 on Wednesday.

Sources: Press release, Bloomberg, MarketWatch
Commentary: Billionaire Trader Takes Major Bear Stearns Stake • Mean Reversion and Cheap Financial Stocks • Goldman Reports Record Q3 Earnings, Smashes Estimates
Stocks/ETFs to watch: BSC. Competitors: GS, LEH, MS, MER

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