Jefferies Earnings Preview
Jefferies (NYSE: JEF), the embattled boutique investment bank, reports fiscal fourth-quarter results before the bell and analysts expect a profit of 14 cents a share on revenue of $583.2 million. That profit decline would be nearly 55% from a year earlier and should Jefferies miss profit estimates, it would be the third consecutive the bank has accomplished that ominous feat.
Estimates for Jefferies' fourth-quarter results drifted lower from 35 cents to 24 cents to the current estimate of 14 cents per share. More importantly, this will be the first time management updates Wall Street on its Europe exposure following speculation in November the bank's holdings of European sovereign debt could lead to disaster.
In November, Jefferies dramatically slashed its holdings of PIIGS debt, but the shares were battered following the collapse of MF Global. Jefferies has said a profitable fourth quarter and results that trump those posted in the third quarter. It should be noted the stock is up about 20% in the past month, but it's still 34% below its 200-day moving average and still down 55% year-to-date.
The bottom line: Jefferies must assure investors it has put the Europe issue to bed and that the rumors that grappled the company recently were just that: Rumors. If investors do not believe that, then the market could continue to view Jefferies as potential sequel to MF Global.
The average price target for the stock is $17.39, well above Monday's close of $11.80.
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