Piper Jaffray's first-quarter earnings tripled on lower revenue

Despite a sharp increase in reported first-quarter profit over the year-ago results, shares of Piper Jaffray Cos. dropped about 1 percent to $32.32 per share amid Wednesday's falling market.

The Minneapolis-based investment banker, benefiting from strong equity markets and earlier cost-cutting moves, earned $10.1 million, or 57 cents a share. However, revenue was down, for a variety of reasons.

"Our businesses experienced mixed market conditions to start the year," said CEO Andrew Duff in a conference call with analysts.

The surging stock market in the first quarter was good for Piper's asset-management business, Duff said, but merger-and-acquisition activity slowed after a strong fourth quarter that was fueled by the 2013 increase in capital gains taxes. Piper's bond business faced headwinds due to "uncertainty over interest rates."

Analyst Joel Jeffrey of Keefe Bruyette & Woods asked Duff whether the first quarter pullback in the M&A business would reverse itself this year.

"I look at our business over time and there is a seasonality to it … and I think it was exasperated this year with the tax dynamic at the end of [2012]," Duff said. "We typically have a stronger second half to the year, and we would anticipate that this year. Our [deal] pitch activity is definitely up."

Piper's first-quarter revenue was down slightly, missing analysts' expectations, partly due to the slowed deal-making activity. Some of that revenue was made up by investments within Piper's merchant banking portfolio, as well as revenue from the asset management business.

"I think your assessment is correct," Duff responded to a question about whether last year's streamlining will reap improved performance. "There's leverage in the business at this point with the cost reductions that we've done … on improving revenues."

Piper's return on equity was 5.5 percent in the quarter, compared with 1.6 percent in the first quarter of 2012. The stock of Piper ran from $19.35 per share last August to $42.36 per share in February, before backing off in recent weeks.