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Greenhill drops 8 pct. after 3rd-qtr disappoints

NEW YORK -- Shares of Greenhill & Co. Inc. dropped 8 percent Thursday after the investment management company reported flat profit for the third quarter.

THE SPARK: Greenhill, which advises companies on mergers, acquisitions and raising capital, said Wednesday that its net income was $8.6 million, or 28 cents per share, in the July-September quarter, exactly the same as in the third quarter of 2011. The New York-based company also posted a 3.8 percent increase in revenue, to $62.7 million.

Analysts, on average, were expecting profit of 31 cents per share, on revenue of $68.5 million, according to FactSet.

Greenhill's loss on investment revenue narrowed to $10 million from $22.8 million last year. The negative investment revenue continued to be due mainly to the company's unrealized loss in the value of its investment in satellite communications provider Iridium Communications Inc.

Third-quarter advisory revenue declined 13 percent, to $72.7 million.

THE BIG PICTURE: Greenhill noted that its financial results can fluctuate sharply depending on the number and size of completed transactions for which it was the adviser, and on other factors. And transaction activity around the world continued to be weak in the third quarter and the first nine months of the year, the company said.

THE ANALYSIS: Susquehanna Financial Group analyst Doug Sipken said he expects deal closures to increase as the year comes to a close, and raised his fourth-quarter estimates. Greenhill "continues to show momentum in an otherwise tough environment," he said in a note to clients. Pointing to an increase in retainer fees in the third quarter, he said that's the "best leading indicator you could have" in a mergers and acquisitions advisory business. He kept a "Neutral" rating on the stock and a price target of $52.

SHARE ACTION: Greenhill shares fell $4.10, or 8 percent, to $46.94 in afternoon trading, slightly above the session lows. They have traded between $31.77 and $53.88 over the past 52 weeks.