UPDATE 2-FCStone shares plunge after earnings miss Street view

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July 10 (Reuters) - Shares of commodity risk management firm FCStone Group Inc FCSX.O slumped over 50 percent Thursday, its biggest percentage drop ever, after posting a quarterly profit that fell short of analysts' view.

The stock lost half its value and was the biggest percentage loser on the Nasdaq, off $15.05, or 50.3 percent, to $14.85 in mid-day trade.

The company, which went public last year, said earnings for its third quarter were hurt by a $3.1 million reversal of an unrealized hedging gain from derivative contracts and a $1.1 million bad-debt write off primarily from the cotton market.

The derivative instruments, which were entered in to manage exposure to short term interest rates, were liquidated during the quarter, it added.

FCStone, which helps companies manage risks related to commodities trading, reported earnings of $8.0 million, or 28 cents a share, compared with $8.1 million, or 29 cents a share last year.

The company also said expenses, excluding costs of commodities sold, were greater than the prior year due to higher broker commissions and pit brokerage and clearing fees.

Excluding items, net income was 42 cents a share.

Analysts expected the company to earn 47 cents a share, according to Reuters Estimates.

The company reported quarterly revenue of $83.4 million, while analysts were expecting $82.55 million. The reduction in revenue also resulted from sale of a majority stake in June 2007 of a segment that represented grain merchandising.

Revenue in the commodity and risk management services segment, which has risen last two quarters, increased about 55 percent during the quarter.

FCStone shares dropped 40 percent on March 17, along with shares of other financial companies, mainly due to liquidity concerns at commodity broker and peer MF Global (MF.N).

The stock was already trading down about 35 percent year-to-date before the announcement of its third quarter results. (Reporting by Amiteshwar Singh in Bangalore; Editing by Kavita Chandran)