Disappointing third-quarter performances of many equity funds followed by Merrill Lynch prompted the wirehouse to lower earnings expectations on seven of the 11 mutual fund providers on its analysts' radar screens, CBS MarketWatch reports.
Merrill's analysts initially envisioned a 1.9% third-quarter gain at the fund companies but final reports indicate that the firms' investments slipped 1.7% during that period. Although Merrill has stopped short of lowering individual firms' ratings, the reduced earnings may give investors reasons to worry.
Janus Capital Group and Legg Mason suffered the sharpest declines. Merrill reduced Janus' third-quarter estimates by one cent and lowered its full-year estimate to 61 cents from 65 cents. Legg Mason's fiscal 2005 forecast slipped to $4.78 per share from $4.95. Janus, which primarily invests in equities, has less room to maneuver in the current depressed equities market than Legg Mason, a strong promoter of fixed-income investments.
T. Rowe Price Group, which has 75% of its assets in equity funds, took a slight earnings reduction from Merrill and Franklin Resources was the only manager which received a modest, 0.7%, gain.