Jefferies Financial Group (JEF) has reported solid financial results on a day when media reports surfaced that the Wall Street investment bank is a takeover target.
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Jefferies posted record revenues, although it missed analysts’ profit expectations. The boutique investment bank reported earnings per share (EPS) of $0.70, which fell short of the consensus forecast of $0.95. Revenue in the period totaled $2.02 billion, which matched analyst estimates.
Sales were up 27% year-over-year and were a record for the company. The latest results included a $36 million after-tax write-down of goodwill related to the announced sale of Tessellis and $17 million in losses from private credit firms Market Financial Solutions and First Brands.
The firm said that its investment banking revenues reached a record $1.02 billion during the quarter, up 45% from a year earlier and driven by improved underwriting performance. Capital markets revenues totaled $779 million, up 12% from a year ago, with equities posting record revenue of $558 million. Fixed income revenues declined to $220 million from $289 million a year earlier.
Jefferies’ income statement. Source: The Fly
Takeover Speculation
Jefferies latest print was made public hours after reports surfaced that Japan’s Sumitomo Mitsui Financial Group (SMFG), Japan’s second-largest lender, is planning a potential takeover bid for the investment bank. While Jefferies hasn’t commented publicly, some media reports say the Wall Street investment bank is not interested in selling itself.
Sumitomo Mitsui Financial already has a board seat at Jefferies and has held a stake in the U.S. bank since 2021. Last September, Sumitomo Mitsui Financial said it would invest a further $912.84 million into Jefferies, which increased its stake in the investment bank to 20% from 14.5% previously. News of a potential takeover comes as Jefferies faces scrutiny over its exposure to private credit.
Is JEF Stock a Buy?
Jefferies stock has a consensus Moderate Buy rating among five analysts. That rating is based on three Buy and two Hold recommendations issued in the last three months. The average JEF price target of $55.60 implies 40% upside from current levels. These ratings could change after the company’s financial results.
