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Jefferies (JEF) Stock Up 6.4% as Q2 Earnings Beat Estimates
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Shares of Jefferies Financial Group Inc. (JEF - Free Report) gained 6.4%, following the release of its second-quarter 2019 results. Adjusted earnings per share for the three-month period ended May 31, 2019, was 41 cents, surpassing the Zacks Consensus Estimate of 24 cents.
The company’s results benefited from improvement in revenues. However, higher expenses created a headwind. The Merchant Banking and Corporate segment’s performance was decent.
In the reported quarter, there was a non-recurring tax benefit. After taking its impact into consideration, net income attributable to shareholders for the three months ended May 31, 2019, was $670.8 million. This compares with net income attributable to shareholders of $725.5 million recorded in the three months ended Jun 30, 2018.
Revenues Improve, Expenses Rise
Net revenues for the reported quarter were $1.10 billion, up from $911.2 million recorded in the three months ended Jun 30, 2018. The figure surpassed the Zacks Consensus Estimate of $927.3 million.
Total expenses were $940.3 million, up from $907 million reported in the second quarter of 2018. This increase was due to rise in compensation and benefits costs, floor brokerage and clearing fees, and depreciation and amortization costs.
Segmental Information
Jefferies Group: This segment reported net revenues of $901.9 million in the three months ended May 31, 2019, up from $822.6 million recorded in the three months ended Jun 30, 2018. Expenses were $746.7 million, up from $700.7 million recorded in the second quarter of 2018.
Merchant Banking: Net revenues were $187.3 million in the three months ended May 31, 2019, up from $86.4 million recorded in the three months ended Jun 30, 2018. Expenses were $158.3 million, down from $169.8 million recorded in the three-month period ended Jun 30, 2018.
Corporate: This segment reported net revenues of $9 million, up from $3 million recorded in the three months ended Jun 30, 2018. Expenses were $22.9 million, down from $24.2 million recorded in the second quarter of 2018.
Share Repurchases
During the reported quarter, the company repurchased 7.8 million shares for $150 million.
Our Viewpoint
Jefferies is a geographically diversified company, with presence in almost all the major global markets. Thus, risks stemming from geographical diversification might hurt financials. Moreover, elevated costs are likely to hurt profits. However, decent revenue growth remains a positive for the company. Further, supported by a solid capital position, Jefferies is expected to continue enhancing shareholder value through efficient capital deployment activities.
JEFFERIES FINANCIAL GROUP INC. Price, Consensus and EPS Surprise
Among the other finance companies, Citigroup Inc. (C - Free Report) is scheduled to report quarterly results on Jul 15. JPMorgan Chase (JPM - Free Report) and The Bank of New York Mellon Corp. (BK - Free Report) are expected to report numbers on Jul 16 and Jul 17, respectively.
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Jefferies (JEF) Stock Up 6.4% as Q2 Earnings Beat Estimates
Shares of Jefferies Financial Group Inc. (JEF - Free Report) gained 6.4%, following the release of its second-quarter 2019 results. Adjusted earnings per share for the three-month period ended May 31, 2019, was 41 cents, surpassing the Zacks Consensus Estimate of 24 cents.
The company’s results benefited from improvement in revenues. However, higher expenses created a headwind. The Merchant Banking and Corporate segment’s performance was decent.
In the reported quarter, there was a non-recurring tax benefit. After taking its impact into consideration, net income attributable to shareholders for the three months ended May 31, 2019, was $670.8 million. This compares with net income attributable to shareholders of $725.5 million recorded in the three months ended Jun 30, 2018.
Revenues Improve, Expenses Rise
Net revenues for the reported quarter were $1.10 billion, up from $911.2 million recorded in the three months ended Jun 30, 2018. The figure surpassed the Zacks Consensus Estimate of $927.3 million.
Total expenses were $940.3 million, up from $907 million reported in the second quarter of 2018. This increase was due to rise in compensation and benefits costs, floor brokerage and clearing fees, and depreciation and amortization costs.
Segmental Information
Jefferies Group: This segment reported net revenues of $901.9 million in the three months ended May 31, 2019, up from $822.6 million recorded in the three months ended Jun 30, 2018. Expenses were $746.7 million, up from $700.7 million recorded in the second quarter of 2018.
Merchant Banking: Net revenues were $187.3 million in the three months ended May 31, 2019, up from $86.4 million recorded in the three months ended Jun 30, 2018. Expenses were $158.3 million, down from $169.8 million recorded in the three-month period ended Jun 30, 2018.
Corporate: This segment reported net revenues of $9 million, up from $3 million recorded in the three months ended Jun 30, 2018. Expenses were $22.9 million, down from $24.2 million recorded in the second quarter of 2018.
Share Repurchases
During the reported quarter, the company repurchased 7.8 million shares for $150 million.
Our Viewpoint
Jefferies is a geographically diversified company, with presence in almost all the major global markets. Thus, risks stemming from geographical diversification might hurt financials. Moreover, elevated costs are likely to hurt profits. However, decent revenue growth remains a positive for the company. Further, supported by a solid capital position, Jefferies is expected to continue enhancing shareholder value through efficient capital deployment activities.
JEFFERIES FINANCIAL GROUP INC. Price, Consensus and EPS Surprise
JEFFERIES FINANCIAL GROUP INC. price-consensus-eps-surprise-chart | JEFFERIES FINANCIAL GROUP INC. Quote
Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among the other finance companies, Citigroup Inc. (C - Free Report) is scheduled to report quarterly results on Jul 15. JPMorgan Chase (JPM - Free Report) and The Bank of New York Mellon Corp. (BK - Free Report) are expected to report numbers on Jul 16 and Jul 17, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>