Jefferies (JEF) Down as Q2 Earnings & Revenues Lag Estimates
Shares of Jefferies Financial Group Inc. JEF lost 1.4% in afterhours trading in response to lower-than-expected second-quarter fiscal 2023 (ended May 31) results. Adjusted earnings per share of 29 cents lagged the Zacks Consensus Estimate of 33 cents. The bottom line also compared unfavorably with 46 cents earned in the prior-year quarter.
Results were adversely impacted by lower revenues on dismal asset management and advisory businesses. However, a decline in expenses and better-than-expected capital markets performance acted as tailwinds.
Results in the reported quarter excluded $72 million of pre-tax losses related to OpNet (formerly Linkem), a legacy merchant banking investment. After considering this, net income attributable to shareholders was $12.4 million, down 89% year over year.
Revenues & Expenses Fall
Net revenues were $1.04 billion, down 22% year over year. Also, the top line missed the Zacks Consensus Estimate of $1.1 billion.
Total non-interest expenses were $1.02 billion, down 13%. The fall was mainly due to lower compensation and benefits costs.
Segment Performance
Investment Banking and Capital Markets: Net revenues were $1.05 billion, down 5% from the prior-year quarter. Weakness in investment banking business more than offset solid performance of capital markets.
Asset Management: Net revenues were negative $22.4 million against revenues of $234 million in the year-ago quarter.
Share Repurchase Update
During the fiscal second quarter, Jefferies repurchased 2.2 million shares for $67 million.
The company’s board of directors increased the share buyback authorization to a total of $250 million.
Our Take
Robust fixed income and equity trading business, rebound in underwriting operations and lower expenses will support Jefferies’ financials. However, challenging market conditions for investment banking operations pose a concern.
Jefferies Financial Group Inc. Price, Consensus and EPS Surprise
Jefferies Financial Group Inc. price-consensus-eps-surprise-chart | Jefferies Financial Group Inc. Quote
Currently, Jefferies carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of Other Banks
JPMorgan JPM is slated to report second-quarter 2023 results on Jul 14.
Over the past seven days, the Zacks Consensus Estimate for JPMorgan’s quarterly earnings has moved marginally north to $3.64. This indicates 31.9% growth from the prior-year quarter.
Bank of America BAC is scheduled to announce quarterly numbers on Jul 18.
Over the past week, the Zacks Consensus Estimate for Bank of America’s quarterly earnings has remained unchanged at 86 cents, implying a 17.8% rise from the prior-year reported number.
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