Jefferies Results Cheer Wall Street
Jefferies reported better revenue for the first quarter of its financial year, which should indicate better trading and investment banking results for bigger Wall Street firms.
Because Jefferies' fiscal year begins earlier than January 1, it reports first-quarter results earlier than most of the big Wall Street names. So its results are often looked to as a window on how the rest of the Street is likely to perform.
The first quarter for Jefferies ended on February 29. The firm saw $77.1 million in net income, or 33 cents a share, for the quarter. That compares to analyst estimates of 28 to 29 cents per share. Fixed-income trading revenue rose 6 percent from the first quarter of 2011. Those results are particularly good because they included December, widely considered a difficult trading month, and did not include March, which is seen as having been a good month for bond traders.
Investment banking revenue rose 20 percent from a year earlier, also a good sign for the rest of Wall Street. The company posted a 21 percent rise underwriting revenue. Advisory revenue climbed 19 percent.
It's highly unlikely that this is a storyline unique to Jefferies.
No one thinks that Jefferies out-traded Morgan Stanley and Goldman Sachs, or stole a tremendous amount of underwriting business from them. So the expectation is that what's good for Jefferies is likely also good — perhaps even better — for the rest of Wall Street.
Perhaps the best news for Jefferies is that no one is worried about the survival of the firm anymore. In the days and weeks following the collapse of MF Global, Jefferies was literally fighting for its life as speculation grew that the firm might be over-exposed to European sovereign debt. Jefferies dealt with the speculation by revealing an unprecedented level of detail on its sovereign debt holdings and effectively put to rest fears for the life of the firm.
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