Jefferies Group, Inc. (NYSE: JEF) should finally get some vindication showing that it is truly not the next MF Global like so many rumors and short seller attacks may were suggesting.  The investment banking firm reported $0.21 EPS versus $0.31 EPS a year earlier and versus the Thomson Reuters estimate of $0.14 EPS.  If you back out accounting items the figure was still $0.17 EPS.  In raw dollar terms, earnings were $48 million or $39 million outside of accounting items.

Net revenues were $554 million, or $534 million excluding accounting items, down from $680 million a year earlier and against $562.36 million expected by the Thomson Reuters consensus estimate.

The company referred to the quarter as challenging with continued global volatility “compounded by a November filled with a barrage of misinformation about Jefferies.”

The brokerage firm also reported that its reduced its total balance sheet by nearly one quarter.  The firm’s leverage dropped to 9.9x from 12.9x.  The claim is that competitive and legislative forces continue to evolve in ways that favor its own client-focused model.
As of November 30, 2011, its various book values per share were listed as follows:

• Common book value per share $16.35
• Adjusted book value per share $15.48
• Tangible common book value per share $14.40
• Adjusted tangible book value per share $13.74 

Jefferies shares closed down at $11.80 on Monday and shares are indicated up 5% at $12.40 in the trading reaction on Tuesday morning.  Even if Jefferies is better off than many of the big banks, today’s market will treat book value as implied ceilings rather than implied floors in the share prices.

JON C. OGG

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