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Jefferies Has Whitney's Back on Buy Call

Shares of Jefferies are trading higher on Tuesday after an earnings beat, paying back noted bank analyst Meredith Whitney for launching on Jefferies at a buy last week.



) -- Shares of securities firm

Jefferies Group

(JEF) - Get Report

are experiencing their biggest gain in over a year, after reporting revenue and earnings on Tuesday morning that came in ahead of Street expectations.

Jefferies revenue rose 13% to near-$670 million and its earnings per share of 41 cents was 4 cents above the consensus estimate.

Last week, noted bank analyst Meredith Whitney launched coverage of Jefferies at outperform and with a $27 price target. As a result of the 10% spike on Tuesday morning, Jefferies shares were trading above $25.

Investment banking revenue was the key driver of earnings success for Jefferies, doubling to $256 million.

Jefferies made a big push into healthcare M&A when it poached most of the UBS healthcare team. Most recently, Jefferies was named co-advisor with Goldman Sachs to Valeant Pharmaceutical, which announced a deal to merge with Biovail on Monday.

Jefferies trading commissions were flat and its principal transactions down by 38% for the second quarter.

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Jefferies shares were up just short of 10% on Tuesday morning, and had surpassed their average daily trading volume before midday.

Jefferies' second-quarter results can't be compared to the prior year because the securities firm changed its year-end from December to November.

For the five-month period ended May 31, net revenue increased 7%, to $999 million. Investment banking revenues more than doubled to $352 million during the same time period.

Net profit increased 18% to $119 million in the five-month period.

Not all analysts covering Jefferies were impressed by the second quarter results, though. Ticonderoga Securities reiterated its sell rating on the stock, citing a deterioration in book value.

-- Reported by Eric Rosenbaum in New York.

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