Jefferies Financial Group Inc. (JEF) reported a 64% dip in earnings for the first quarter of 2019 due to higher income tax provision as well as a decline in revenues. The investment banking and capital markets company’s results were mixed when compared with the analysts’ expectations.
Net income plunged 66% to $47 million and earnings plummeted 58.8% to $0.14 per share. Net revenue fell 7.5% to $828.4 million. The trading environment was especially poor throughout December and its results in both Equities and Fixed Income are excellent considering the volatility and risk of this period.
Total revenues from Jefferies Group LLC, which included Investment Banking, Capital Markets, and Asset Management, declined by 2.9% to $1.05 billion, due to a drop in revenue from investment banking. The decline in investment banking revenue was due to the impact of market conditions in December and the shutdown of the US Government in December and January.
While Investment Banking results are sub-par relative to historical standards and trend, the results were hurt by a very light activity during the December market downturn and this was further exacerbated by the government shutdown for five weeks to the end of January. The company’s business has resumed its more normal pace with the US government open for business.
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The company’s current Investment Banking backlog for capital raising and mergers and acquisitions is robust and the trading environment is good. Jefferies expects to continue to reap the benefits of high-quality new hires it has made across the platform, particularly in Investment Banking.
Jefferies said its first-quarter results were negatively impacted by a $25 million non-cash decrease in the mark-to-market value of its oil hedge portfolio within its Vitesse investment, as oil prices recovered to $57 per bbl from $51 per bbl at November 30, 2018. Excluding the impact of the fair value decline, Vitesse’s adjusted pre-tax income was $10 million.
Shares of Jefferies ended Wednesday’s regular session down 0.16% at $18.70 on the NYSE. The stock has fallen over 15% in the past year while it has risen over 7% in the past three months.