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Jefferies (JEF) Beats on Q2 Earnings & Revenues, Ups Dividend

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Shares of Jefferies Financial Group Inc. (JEF - Free Report) jumped 4.4% in aftermarket trading in response to better-than-expected second-quarter fiscal 2021 (ended May 31) results. Earnings per share of $1.30 significantly outpaced the Zacks Consensus Estimate of 86 cents. Also, the bottom line compared favorably with 16 cents earned in the prior-year quarter.

Results were driven by robust rise in revenues. Both the Investment Banking and Capital Markets, and Asset Management segments’ performance was impressive. However, higher expenses were a headwind.

Net income attributable to shareholders was $352.6 million, up substantially from the $44.9 million recorded in the prior year.

Revenues & Expenses Rise

Net revenues were $1.95 billion, up 70% year over year. Also, the top line beat the Zacks Consensus Estimate of $1.56 billion.

Total expenses were $1.45 billion, up 36.4%. The rise was mainly due to higher compensation and benefits costs.

Solid Segment Performance

Investment Banking and Capital Markets: Net revenues were $1.57 billion, up 52.9% from the prior-year quarter. Expenses totaled $1.15 billion, up 40.8%.

Asset Management: Net revenues were $54.6 million, up substantially from $7.4 million recorded in the year-ago quarter. Expenses totaled $43.5 million, down 11.1%.    

Merchant Banking: Net revenues were $318.8 million, rising significantly from $107.2 million in the prior-year quarter. Expenses were $236.3 million, up 34.9%.

Corporate: Net revenues were $0.7 million, down from the $1.5 million recorded in the prior year. Expenses were $12.8 million, down 10.8%.

Dividend Hike

Concurrently, Jefferies announced a quarterly cash dividend of 25 cents per share, representing 25% hike from the prior payout. The dividend will be paid on Aug 27 to shareholders of record as on Aug 16.

Our View

Steady improvement in capital markets performance, solid capital position and global footprints are expected to continue supporting Jefferies’ financials. However, persistent rise in operating costs is a concern.

Currently, Jefferies carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Dates of Other Banks

Among the other banks, JPMorgan (JPM - Free Report) is slated to report second-quarter 2021 results on Jul 13. Citigroup (C - Free Report) and Bank of America (BAC - Free Report) are scheduled to announce on Jul 14.

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