Jefferies Cites New Wall Street Earnings Drag: Charity
NEW YORK (TheStreet) -- Since the financial crisis, investors and reporters reading Wall Street earnings have grown used to adjustments that take into account so-called onetime legal settlements, regulatory penalties, asset writedowns and a quarterly exercise in backing out accounting gains and losses from an investment bank's debt costs.
On Tuesday, Jefferies had to adjust for charity, and specifically, donations made to help a battered East Coast recover from a Hurricane Sandy, a late-October storm that destroyed thousands of homes and left millions without power.
On the second line of Jefferies earnings release, the investment bank pegs its quarterly net income at $72 million, but highlights the number would have been $81 million had it not been for donations made in the wake of Hurricane Sandy and unnamed costs associated with its acquisition by financial holding company Leucadia National (LUK).Earnings per share, excluding Sandy-related donations and M&A expense was 35 cent a share, and 31 cents a share on a GAAP-basis. In a supplement to earnings, Jefferies states it paid $4.1 million in Hurricane Sandy donations. A financial supplement notes, adjusted revenue and EPS figures "[reflect] amortization of intangible assets recognized in connection with the acquisitions of Hoare Govett and the Bache entities, donations to Hurricane Sandy relief of $4.1 million and transaction costs (primarily professional fees) associated with the announced merger with Leucadia National Corporation of $4.2 million." Jefferies is the first of a host of publicly traded investment banks to report fourth quarter earnings that could include a new type of earnings adjustment -- prospective Hurricane Sandy related aid. Goldman Sachs (GS), Morgan Stanley (MS), JPMorgan (JPM), Bank of America Merrill Lynch (BAC) and Citigroup (C) all report fourth quarter earnings in the New Year, but have publicly disclosed multi-million dollar commitments to Hurricane Sandy relief. Even with the visible Sandy-related adjustments, it was a banner quarter and year for Jefferies. Overall, fourth quarter earnings increased 48% and revenue rose nearly 39%. Meanwhile full-year revenue $3 billion was a record for the firm, even if overall profits fell slightly for the year to $282 million. The bank's fourth quarter earning surge was a result of strong trading gains and flat investment banking advisory and underwriting revenue. Fixed Income net revenues of $1.2 billion were a 66% increase from 2011 levels, while $1.13 billion in investment banking revenue represented no year-over-year change. Jefferies shares rose over 3% in Tuesday trading to $18.80, adding to 30%-plus year-to-date gains.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV