Here's our initial take on Jefferies Financial Group's (JEF 1.05%) fiscal second-quarter financial report.
Key Metrics
| Metric | Q2 FY 2024 | Q2 FY 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Total revenue | $1.66 billion | $1.63 billion | -1% | Beat |
| Adjusted earnings per share | $0.64 | $0.40 | -38% | Missed |
| Investment banking revenue | $787.4 million | $766.3 million | -3% | n/a |
| Capital markets revenue | $707.1 million | $704.2 million | 0% | n/a |
Wall Street Turbulence Weighs on Jefferies
Jefferies didn't have very high expectations coming into Q2, but the company still wasn't able to satisfy investors fully. Earnings came in around $0.03 per share less than the analysts' consensus had expected, and a slightly smaller drop in revenue than most were expecting wasn't enough to restore confidence in the financial institution's overall health.
Jefferies pointed to several countervailing factors affecting its results. Within its investment banking segment, Jefferies saw a massive uptick in advisory revenue, spurred by gains in market share and greater levels of activity in mergers and acquisitions. Weighing against those gains, though, was an equally large drop in equity underwriting activity. The net result was a decline in the segment's overall sales year over year.
Meanwhile, on the capital markets side of the business, equities fared well, particularly in Europe and Asia. Jefferies' derivatives business was also healthy. Fixed income revenue was down significantly, though, as volatility led to a tough trading environment for bonds.
Immediate Market Reaction
Jefferies shares moved slightly lower on the news, as investors dealt with the earnings miss. The stock was trading down almost 2% in the first 45 minutes of after-hours trading following the release of the latest financial report Wednesday afternoon.
The move lower threatened to bring to an end a rebound that saw the stock rise roughly 42% from its April lows. Yet even with the recent gains, Jefferies struggled early in 2025, and it remains down about 29% from where it started the year.
What to Watch
Part of the reason for the bottom-line hit was a notable rise in non-interest expenses. Jefferies pointed to higher brokerage and clearing fees, which were consistent to some extent with higher trading volumes for various securities products. In addition, though, Jefferies spent more on business development as well as technology and communications expenses.
Regardless, Jefferies investors need to look forward, and CEO Richard Handler tried to remain optimistic about the company's prospects. Given unexpected resilience in the global economy, strong backlog figures, and favorable relationships with its clients, Jefferies is setting a higher bar for the rest of the year. Now it's just up to Handler and his company to get the job done.
