Alex. Brown earnings down 32% Flat market deflated 1991's record gains

July 22, 1992|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

Alex. Brown Inc. said yesterday that its earnings dropped 32 percent during the second three months of the year as a flat market kept stock and bond trading commissions stagnant and a weak market for stock offerings sent investment-banking revenues sharply lower.

The Baltimore investment-banking company said it earned $9.6 million, or 57 cents per fully diluted share, during the quarter that ended June 26.

The company earned 87 cents a share during the same period of 1991, aided by a stock market buoyed by the Persian Gulf war and an especially strong market for initial public offerings by biotechnology companies and others.

"It's considerably lower than what they earned in the first quarter," as well as in mid-1991, said Perrin Long, a securities analyst for First of Michigan Corp. in Detroit. "But even 60 cents a share is damn good earnings. . . . Look at the changes in the [business] environment."

Mr. Long said Alex. Brown's New York-based competitors also saw their earnings shrink during the quarter.

Alex. Brown earned 60 cents a share in the quarter on a primary basis, which does not adjust for debt securities and other instruments that can be converted to common stock.

Analysts had predicted that Alex. Brown would earn as much as 95 cents a share in the second quarter, slightly more than it earned in the second quarter of last year. Still, the company was pleased, its chief financial officer said.

think the quarter was a good quarter," Managing Director Beverly Wright said. The company had not expected to keep up the record profits it posted in late 1991 and the first quarter of this year, she said.

Matching 1991's results was an imposing goal. Last year was the best in Alex. Brown's 191-year history. After a painful 1990 during which there were a few layoffs late in the year, the stock and bond markets took off when the gulf war began. Another market surge, following a December interest-rate cut by the Federal Reserve, also boosted profits.

In between, Alex. Brown was one of the prime beneficiaries of a wave of initial public offerings (IPOs) by young companies selling stock publicly for the first time. The highest-flying industry for the IPOs was biotechnology, an area in which Alex. Brown has particular strength.

This year, the culprit behind lower second-quarter profits was investment-banking revenues, which fell more than $6 million, to $37.1 million, while commission revenues on stock and bond trading were flat. Overall revenue fell to $98.9 million from $105.1 million in the second quarter last year.

Ms. Wright said that because Alex. Brown's investment bankers concentrate on a relatively small number of industries, its investment-banking revenues often go up or down faster than the market.

Mr. Long suggested that Alex. Brown's emphasis on biotechnologycompanies, whose stocks have been battered this year after a strong 1991, might be part of the reason for the drop in its investment-banking revenue.

"Biotech is what they've been noted for," said Mr. Long, who predicted that Alex. Brown would earn $2.80 a share for the year on a primary basis, including $1.65 a share in the first half.

Three months ending 6/26/92

.. .. .. .. .. Revenue .. .. .. .. .. Net .. .. .. .. .. Share*

'92 .. .. .. ..98,860,000 .. .. .. .. 9,607,000 .. .. . 0.57

'91** .. .. .. 105,142,000 .. .. .. 14,202,000 .. .. .. 0.87

% change .. .. .-6.0 .. .. .. .. .. ..-32.4 .. .. .. .. ..-34.5

Six months ending 6/26/92

.. .. .. .. .. Revenue .. .. .. .. .. Net .. .. .. .. Share*

'92 .. .. .. .. 223,015,000 .. .. .. 26,428,000 .. .1.56

'91** .. .. .. .. 198,739,000 .. .. .. 24,827,000 ..1.53

% change .. .. .. .. +12.2 .. .. .. .. .. + 6.4 .. .. + 2.0

*Figures indicate fully diluted earnings per share.

**Three and six months in 1991 ended June 28.

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