Jefferies (JEF) Q1 Earnings Lag Estimates, Costs Decline

Jefferies Financial Group Inc.’s (NYSE:JEF) earnings per share for the three-month period ended Feb 28, 2019 came in at 14 cents, lagging the Zacks Consensus Estimate of 24 cents. The reported figure compares unfavorably with earnings of 34 cents per share reported during the three-month period ended Mar 31, 2018.

The company’s results were hurt by a decline in revenues. Nevertheless, lower expenses were a positive. The Merchant Banking segment’s performance was decent.

Net income attributable to shareholders for the first quarter of 2019 came in at $44.8 million, down 64% year over year.

Revenues & Expenses Decline

Net revenues for the reported quarter were $828.4 million, down 7.5% year over year.

Total expenses were $806.4 million, down 9.4% year over year. This decline was mainly due to a fall in compensation and benefits costs, and cost of sales.

Segmental Information

Jefferies Group: This segment reported net revenues of $685.7 million, down 16.5% year over year. Expenses came in at $623.1 million, slipping 10.8% year over year.

Merchant Banking: Net revenues came in at $136.3 million, surging 84.5% year over year. Expenses were $143.5 million, down 7.5% year over year.

Corporate: This segment reported net revenues of $4.2 million, up 36.7% year over year. Expenses came in at $25.5 million, up 3.8% year over year.

Share Repurchases

During the reported quarter, the company repurchased 9.6 million shares for $195 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, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.

Currently, Jefferies 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, JPMorgan Chase (NYSE:JPM) is scheduled to report quarterly results on Apr 12. Citigroup Inc. (NYSE:C) and The Bank of New York Mellon Corp. (NYSE:BK) are expected to report numbers on Apr 15 and Apr 17, respectively.

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