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Sunday, 04/08/2001

LEH - Lehman Brothers Holdings Inc.

Company Description

Lehman Brothers (NYSE:LEH) is an innovator in global finance and serves the financial needs of corporations, governments and municipalities, institutional clients and high-net-worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private equity and private client services. The firm is headquartered in New York, London and Tokyo and operates in a network of offices around the world.

(source: Lehman Brothers)

Reasons To Invest

Shares of major Wall Street firms have been under pressure for quite some time as trading activity in the stock market, initial public offering (IPOs) deals and merger and acquisition (M&A) activity have all dropped off substantially. The pullback in activity of the aforementioned events can be attributed to the broader economic slowdown sweeping the global economy. And as a result of the slowdown in the "money" business, shares of leading financial firms have pulled back to price levels that now appear very attractive to long-term investors.

Lehman Brothers is one such financial institution that has suffered from the slowdown in the equity markets and the broader economy. Shares of Lehman Brothers traded as high as $86 during the peak of the bull market in early 2000, but have since pulled back to an attractive price level and valuation.

For its part, Lehman Brothers is expected to earn $5.72 per share during fiscal 2001 and $6.46 per share during fiscal 2002. Those future earnings give shares of Lehman Brothers an attractive valuation - 10 times 2001 earnings and 9 times 2001 expected earnings. What's more, the company is expected to sustain a 12 percent year-over-year earnings growth rate for the next five years. When viewed in full context, that 12 percent earnings growth rate looks very attractive based upon the stock's current valuation.

In short, shares of Lehman Brothers have been under pressure for several quarters due to the deteriorating fundamentals in its business lines. However, stock prices tend to turn higher ahead of fundamentals by six months. Having said that, all the bad news may already be discounted in shares of Lehman Brothers and the stock may begin to trade higher in expectations of better business conditions starting in the next six months. In fact, UBS Warburg started coverage on shares of Lehman Brothers with a buy rating late last week based upon the premise that the business environment for the company would improve starting in the next six months.

Finally, Lehman Brothers should greatly benefit from the actions by the Federal Reserve in terms of interest rates. The increased liquidity and lower cost of capital set forth by the FOMC should begin to directly impact Lehman's top and bottom-lines in the near future, which should provide an additional catalyst over the next twelve to eighteen during this cycle of benign monetary.

DRIP Information:

Shares to Qualify = 1           Accept Foreign Accounts: No
Auto-reinvestment  = No         Temper Enrollment Serv:  Yes

Min/Max Investment = $50 to $175,000/year
Reinvestment Fees: 
Dividend: 0              Cash: 0           Auto ReInvest: N/A

Transfer Agent:

Bank of New York


Industry Group:   Broker/Dealer   52-week high=$86.20
Annual Dividend Per Share=$0.28   52-week low =$34.81
Last earnings 03/21    est=1.37   actual=1.39
Next earnings 06-15    est=1.24   versus=1.39
                                  P/E = 10
Analyst Ratings:
Strong Buy    = 6
Moderate Buy  = 3
Hold          = 2
Moderate Sell = 0
Strong Sell   = 0


Copyright 2003

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