Profits for the quarter fell from $438 million in the same quarter in 2006 to $171.3 million.
Analysts forecast shares at $1.79 each, but they came out at $1.16.
Badly placed investments in the sub-prime markets have hit the investment bank hard and it has also been forced to reduce two leading hedge funds after they collapsed.
The collapse cost the bank a total of $200 million in losses and expenses, according to the Telegraph.
Speaking to the newspaper, Jimmy Cayne, chairman and chief executive of the bank, said: "The third quarter was characterized by extremely difficult securitization markets and high volatility levels across asset classes."
Bear Stearns is the hardest hit of all the investment banks so far after Morgan Stanley and Lehman Brothers posted better results than was anticipated.