Earnings roundup: Investment firms enjoy record prosperity

Lehman Brothers and Bear Stearns sent a not-so-subtle message to Wall Street on Thursday when announcing 2006 results — the word “record” appears a combined 37 times in their earnings reports.

Surging stock and bond markets, coupled with an unprecedented level of takeover activity, has turned the big investment houses into corporate cash machines. It is also delivering stratospheric bonuses to top employees, with Goldman Sachs Group Inc. doling out a staggering $16 billion this year.

For all of fiscal 2006, Lehman Brothers Holdings Inc. reported record net income of $4 billion, up 23 percent from the previous year. Bear Stearns Cos.’s profit for the year soared 40 percent to $2.1 billion. Goldman Sachs said Tuesday its full-year profit soared 70 percent to $9.4 billion, and Morgan Stanley Inc. is set to deliver strong results when it reports next Tuesday.

For chief financial officers, closing the books on 2006 has been an eye popping experience. They remain enthusiastic about 2007, though don’t expect to see a repeat as the economy begins to moderate.

“We look out and believe we’re having terrific performance, and you see it building throughout the year all across the board … you can’t help but feel good about where you’re going,” said Lehman CFO Chris O’Meara. “It’s hard to predict where we’ll be next year, but I will tell you we have some high quality people, and that sets us up for good things next year.”

His counterpart at Bear Stearns, Sam Molinaro, said he could tell this was going to be a bumper year for Wall Street. “All you had to do was look at what’s going on in the stock market, and the level of interest in taking companies public and making acquisitions,” he said. “You have to say that the outlook for corporate America is strong right now, its in a growth mode and looking to build.”

The fourth quarter was emblematic of this.

Bear Stearns reported profit attributable to common shareholders rose 38 percent to $557.6 million, or $4 per share, during the three months ended Nov. 30, while Lehman said profit rose 22 percent to $987 million, or $1.72 per share.

Both easily sailed past Wall Street projections, according to analysts polled by Thomson Financial. However, not by as wide a margin as Goldman’s 93 percent jump in quarter profit on Tuesday — the highest quarterly profit ever recorded for a Wall Street firm.

“Costco, the nation’s largest wholesale club operator, said Thursday its first-quarter profit rose 10 percent amid strong demand for consumer electronics. The company expects to take a second-quarter charge as it fixes improperly priced employee stock options.

For the quarter ending Nov. 26, net income totaled $236.9 million, or 51 cents per share, compared with $215.8 million, or 45 cents per share, a year ago. Revenue climbed 9 percent to $14.15 billion from $12.93 billion last year.

Analysts surveyed by Thomson Financial were looking for earnings of 50 cents per share on sales of $14.06 billion.

Costco Wholesale Corp. also trimmed the top end of its earnings guidance for the year to $2.60 per share, from a previous top mark of $2.65. Analysts are estimating earnings of $2.59 per share for fiscal 2007.

Costco shares rose $1.01, or about 1 percent, to close at $54.11 in afternoon trading on the Nasdaq Stock Market.

“Adobe Systems Inc. reported record fourth-quarter revenue and an increase in profit of 16 percent, thanks in part to strong sales of the newest version of digital document software Acrobat.

The report — and bullish comments from executives about the current quarter — sent Adobe stock up $2.21 in after-hours trading. Shares closed Thursday at $40.81, up 51 cents or 1 percent from Wednesday on the Nasdaq Stock Market.

Net income for the three months ended Dec. 1 rose to $181.86 million, or 30 cents a share, from $156.25 million, or 31 cents a share, in the same quarter of last year.

Quarterly sales were a record $682.18 million, up 34 percent.