Earnings Fall 8% at Merrill Lynch

A lethargic summer on Wall Street pressured revenue at Merrill Lynch & Co., resulting in an 8% drop in third-quarter earnings.

However, investors sent the company’s shares up nearly 3% on Tuesday amid optimism by company officials and research analysts that the fourth quarter would be strong enough to lead the company to post a record year. Shares of the brokerage leaped $1.48, to $52.48, on the New York Stock Exchange.

For the three months that ended Sept. 24, Merrill Lynch earned $920 million, or 93 cents a share, compared with $1 billion, or $1 a share, for the same period a year ago.

Revenue was down 3% to $4.8 billion from $5 billion a year earlier.

Analysts surveyed by Thomson First Call had expected earnings of 92 cents a share on revenue of $4.9 billion.

Merrill Lynch executives said the lower revenue and earnings reflected unusually light equity trading in the summer months, prompted by higher oil prices, interest rate concerns and geopolitical uncertainties.

“Like the rest of the industry, we experienced very challenging market conditions and revenue pressures in the quarter,” Chairman and Chief Executive Stan O’Neal said in a statement.

He credited changes in the company’s business model and cost structure, along with revenue diversification programs, with keeping earnings on track despite the difficult quarter.

Analysts agreed, noting that the weak activity on Wall Street in the third quarter had also hurt other brokerage earnings.

“Although this quarter’s results are lackluster at best, we believe they are more symptomatic of an increasingly challenging macro environment rather than a Merrill Lynch-specific problem,” said Jim Hoeg, a research analyst with Goldman Sachs.