Jefferies Financial Group Inc. JEF is slated to report fourth-quarter and full-year fiscal 2024 (ended Nov. 30) results tomorrow, after market close. The company’s quarterly revenues and earnings are anticipated to have improved on a year-over-year basis.
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In the last reported quarter, the company’s earnings lagged the Zacks Consensus Estimate. Results were hurt by higher expenses. However, an improvement in net revenues driven by a solid rebound in the investment banking (IB) business acted as a tailwind. The performance of the reportable segments was also strong.
Jefferies has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with the average beat being 7.49%.
Jefferies Financial Group Inc. Price and EPS Surprise
Jefferies Financial Group Inc. price-eps-surprise | Jefferies Financial Group Inc. Quote
Before we take a look at what our quantitative model predicts, let us check the factors that are likely to have impacted Jefferies’ fourth-quarter performance.
Major Factors to Influence Jefferies’ Q4 Results
IB Income: Following the weakness in the past two years, global mergers and acquisitions (M&As) showed remarkable improvement in the last quarter of 2024. Both deal value and volume improved, driven by solid financial performance, robust U.S. economic growth, buoyant markets and interest rate cuts. Also, the potential easing of regulatory oversight on M&As by the incoming Trump administration fueled deal-making activities. Yet, lingering geopolitical issues were a headwind.
Also, Jefferies’ position as one of the leading players in the space is likely to have supported advisory fees in the quarter. The Zacks Consensus Estimate for advisory fees is pegged at $566.9 million, suggesting a whopping year-over-year surge of 81.5%.
Likewise, the IPO market saw signs of cautious optimism, given market volatility, geopolitical challenges and global monetary easing. The impressive equity market performance drove some solid activity in follow-up equity issuances. Further, bond issuance volume was decent on favorable economic conditions and corporate spreads at near historical lows. Hence, JEF’s underwriting fees are expected to have increased in the quarter.
The consensus estimate for debt underwriting fees is pegged at $197.6 million, suggesting a 52.6% jump. The Zacks Consensus Estimate for equity underwriting fees of $217.1 million indicates an increase of 64.2%. The consensus estimate for total underwriting fees of $414.6 million implies growth of 58.5% from the year-ago quarter.
Thus, growth in total IB income is likely to have been impressive, driven by the expected rise in underwriting revenues and advisory fees. The Zacks Consensus Estimate for IB income of $1.03 billion indicates a year-over-year rise of 78.8%.
Trading Income: The performance of Jefferies’ trading business is expected to have been decent in the to-be-reported quarter, supported by increased client activity and market volatility. The expectations of a solid economic expansion and a gradually cooling inflation drove client activity. Further, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. So, the company’s trading revenues are likely to have witnessed decent growth.
The Zacks Consensus Estimate for equity trading revenues is pegged at $348 million, suggesting a rise of 28.2% from the prior-year quarter. The consensus estimate for fixed-income trading revenues of $220.5 million indicates year-over-year growth of 5.1%.
The Zacks Consensus Estimate for total capital markets income of $568.5 million implies a year-over-year increase of 18.1%.
Expenses: Cost reduction, which has long been the main strategy of Jefferies to remain profitable, is unlikely to have provided major support in the November-ended quarter. As the company has been investing in franchises and upgrading technology, overall costs are anticipated to have been elevated. Further, as the company is expected to have recorded robust revenue growth, compensation related to it will also have risen.
What the Zacks Model Unveils for JEF
Our quantitative model cannot conclusively predict an earnings beat for Jefferies this time around. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Jefferies has an Earnings ESP of 0.00%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Jefferies’ earnings has remained unchanged over the past week at 85 cents per share. The estimate indicates a jump of 183.3% from the year-ago quarter’s reported number.
The consensus estimate for sales of $1.75 billion suggests 46.2% growth on a year-over-year basis.
Jefferies’ Peers That Warrant a Look
Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
JPMorgan JPM is scheduled to release fourth-quarter and full-year 2024 earnings on Jan. 15. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +3.58%.
JPM’s quarterly earnings estimates have moved 2.4% upward over the past month.
Morgan Stanley MS is slated to announce fourth-quarter and full-year 2024 results on Jan. 16. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +0.71%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MS’ earnings estimates for the to-be-reported quarter have moved 2.6% north over the 30 days.
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