Jefferies (JEF) Stock Down 2.2% as Q3 Earnings Lag Estimates
Shares of Jefferies Financial Group Inc. JEF lost 2.2% in after-hours trading in response to lower-than-expected third-quarter fiscal 2023 (ended Aug 31) results. Adjusted earnings per share of 32 cents lagged the Zacks Consensus Estimate of 34 cents. The bottom line also compared unfavorably with $1.10 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 pre-tax losses on a legacy merchant banking portfolio. After considering this, net income attributable to shareholders was $51.4 million, down 74% year over year.
Revenues & Expenses Fall
Net revenues were $1.18 billion, down 22% year over year. Also, the top line missed the Zacks Consensus Estimate of $1.26 billion.
Total non-interest expenses were $1.09 billion, down 10%. The fall was mainly due to lower compensation and benefits expenses and a drastic decline in cost of sales.
Segment Performance
Investment Banking and Capital Markets: Net revenues were $1.17 billion, up 5% from the prior-year quarter. Strength in underwriting business and solid performance of capital markets drove the rise.
Asset Management: Net revenues were $10.1 million, down substantially from $398.3 million in the year-ago quarter.
Share Repurchase Update
During the fiscal third quarter, Jefferies did not repurchase any shares.
The company has a share buyback authorization of $250 million available for the future.
Our View
Robust fixed income and equity trading business, rebound in underwriting operations and lower expenses are expected to 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 third-quarter 2023 results on Oct 13.
Over the past 30 days, the Zacks Consensus Estimate for JPMorgan’s quarterly earnings has moved marginally north to $3.81. This indicates 22.1% growth from the prior-year quarter.
Bank of America BAC is scheduled to announce quarterly numbers on Oct 17.
Over the past month, the Zacks Consensus Estimate for Bank of America’s quarterly earnings has moved 1.2% lower to 80 cents, implying a 1.2% fall from the prior-year reported number.
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