Index falls as earnings results weigh; pound above $1.33, Bodycote soars
On Friday, UBS analyst Benjamin Rubin adjusted the price target on Jefferies Group (NYSE:JEF) shares, reducing it to $75 from the previous $92 while maintaining a Buy rating on the stock. Rubin’s reassessment came in the wake of Jefferies Group’s reported earnings per share (EPS) of $0.57, which fell short of the consensus estimate of $0.94. The financial services firm has experienced a 30.28% decline in its stock value year-to-date, according to InvestingPro data. Despite recent challenges, the company maintains a strong track record of 16 consecutive years of dividend payments, with impressive dividend growth of 33.33% over the last twelve months.
The analyst pointed out that high expectations were set for Jefferies Group at the start of the year. However, the uncertain macroeconomic environment and a slowdown in deal-making activities have negatively impacted the company’s performance. Rubin noted that the results were weaker than expected, prompting the reduction in the price target and the target multiple, from 15.6 times to 14.9 times the forecasted FY2026E EPS. InvestingPro analysis suggests the stock is currently undervalued, with additional metrics and insights available to subscribers.
UBS’s revised valuation reflects a decrease of 18% from the previous price target. Rubin justified the new target by stating that Jefferies Group’s stock should trade slightly above its long-term average multiple of 12.6 times. This is due to the firm’s market share gains. The stock currently trades at a P/E ratio of 19.07x, with a healthy gross profit margin of 78.27%. However, the target remains below the one-standard deviation mark of 15.3 times. Rubin also mentioned that Jefferies Group should trade at a one-standard deviation above their historical discount to the Financial Select Sector SPDR Fund (NYSE:XLF), which is around 20%.
The reduction in the price target by UBS comes amidst a challenging period for Jefferies Group, as the broader financial sector grapples with the impact of macroeconomic uncertainties. Despite the lowered target, UBS continues to see the potential in Jefferies Group’s stock, as reflected in the maintained Buy rating. For deeper insights into Jefferies Group’s financial health, valuation metrics, and additional ProTips, investors can access comprehensive analysis through InvestingPro.
In other recent news, Jefferies Financial Group reported impressive fourth-quarter results, surpassing analyst expectations for both earnings and revenue. The company posted adjusted earnings per share of $0.91, exceeding the consensus forecast of $0.87, while revenue reached $1.96 billion, topping the expected $1.74 billion. Notably, Jefferies experienced significant growth in its investment banking segment, with net revenues increasing 73% year-over-year to $987 million. This surge was driven by record advisory revenues of $597 million. Additionally, capital markets net revenues rose to $652 million from $486 million in the previous year. For the full fiscal year 2024, Jefferies reported net revenues of $7.03 billion, a 50% increase from 2023, and net earnings attributable to common shareholders climbed to $669 million. The company also announced a 14.3% increase in its quarterly dividend to $0.40 per share. Furthermore, Jefferies released its annual letter to shareholders, providing updates on performance and strategic initiatives, though specific details were not disclosed.
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