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Friday, April 19, 2002

Earnings Season Looks Good

by: Sean Hanna, Editor in Chief

Earnings season is upon us again, and for mutual fund company chieftains the news looks like it will be positive. While the rest of corporate America have wandered an earnings desert unlike any in the past, fund firms never went into the red. Even better, analysts their earnings are expected to return to record levels this quarter.

Fund Company Earnings by Quarter
Period Earnings ($ mm)
06/2002 772.8*
03/2002 731.5*
12/2001 678.3
09/2001 688.7
06/2001 763.2
03/2001 687.0
* Estimated earnings
Source: First Call
The best proxy for the health of the fund industry is the dozen publicly-traded firms that primarily manage fund assets. Earnings for that group seem to have hit bottom in the fourth quarter and are expected to reach pre-recession levels in the second quarter.

Wall Street analysts expect that group report net earnings of $732 million for the first quarter, a healthy 7.8 percent boost from the final quarter of 2001 and 6.5 percent gain from the first quarter of 2001. They are also forecasting total earnings of $773 million for the second quarter.

Even Janus and Berger parent Stilwell Financial, the dog of the group in the eyes of Wall Street, has been able to avoid losses. Earnings at the firm fell 23 percent from their peak as the market for growth stocks melted down. In turn, the market punished the stock with the lowest price-earnings ratio for the group. Stilwell shares trade at 14.3 times trailing earnings compared to 21.6 times for the entire group.

Total earnings for the dozen in the fourth quarter were $678 million. All things considered, that is still a healthy bottom line for an industry facing a once in a generation downturn. It is also notable that not one firm reported a loss in any quarter since the recession started.

Whether or not the analysts are right will become in the next couple weeks as results are divulged. So far, just T. Rowe Price has released its quarterly report. It missed its consensus estimate by one penny per share.  

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