Jefferies Financial Group Inc. (NYSE:JEF) defied analyst predictions to release its full-year results, which were ahead of market expectations. The company beat expectations with revenues of US$3.9b arriving 6.9% ahead of forecasts. Statutory earnings per share (EPS) were US$3.03, 5.6% ahead of estimates. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Jefferies Financial Group from two analysts is for revenues of US$4.17b in 2020, which is a reasonable 7.0% increase on its sales over the past 12 months. Statutory earnings per share are forecast to tumble 68% to US$0.97 in the same period. Before this earnings report, analysts had been forecasting revenues of US$3.87b and earnings per share (EPS) of US$1.41 in 2020. So it's pretty clear analysts have mixed opinions on Jefferies Financial Group after the latest results; even though they upped their revenue numbers, it came at the cost of a pretty serious reduction to per-share earnings expectations.
There's been no major changes to an analyst price target of US$26.00, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' valuation.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Jefferies Financial Group's past performance and to peers in the same market. One thing stands out from these estimates, which is that analysts are forecasting Jefferies Financial Group to grow faster in the future than it has in the past, with revenues expected to grow 7.0%. If achieved, this would be a much better result than the 26% annual decline over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 4.9% next year. Although Jefferies Financial Group's revenues are expected to improve, it seems that analysts are also expecting it to grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Jefferies Financial Group going out as far as 2021, and you can see them free on our platform here.
You can also see whether Jefferies Financial Group is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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