Jefferies 1Q Results Beat the Street, Shares Rise

Jefferies (NYSE:JEF) suffered a 12% drop-off in first-quarter profits due to higher costs, but the midsize investment bank’s earnings and revenue surpassed Wall Street’s expectations.

Shares of New York-based Jefferies, which came under enormous pressure last year during the height of the European sovereign debt crisis, rallied more than 3% in the wake of the results.

The company said it earned $77.1 million, or 33 cents a share, last quarter, compared with a profit of $87.3 million, or 42 cents a share, a year earlier. Analysts had been calling for EPS of just 29 cents.

Revenue inched up 2.2% to $758.1 million, easily topping the Street’s view of $699 million.

Jefferies said its investment-banking revenue jumped 20% to $286 million, while fixed-income revenue rose 6.6% to $339 million.

“These solid results reflect our continued growth in investment banking and strong performance in fixed income,” CEO Richard Handler said in a statement. "We believe our firm is unique today in our intense focus on offering an integrated, global capital markets platform to our clients and an entrepreneurial culture to our employee-partners.”

Jefferies was hurt by a 5.2% increase in total non-interest expenses to $609.3 million, highlighted by a jump in technology and communications expenses.

In an effort to continue to shrink its balance sheet, Jefferies said it total assets fell to $34.6 billion, down from $45 billion at the end of August and $34.9 billion a year earlier. Leverage also fell to 9.5 to 1 from 9.9 to 1 a year earlier.

In the wake of the collapse of MF Global last fall, Jefferies saw its stock tumble amid similar worries about its exposure to eurozone sovereign debt.

But Jefferies has bounced back this year as it has trimmed its balance sheet and eurozone jitters have receded. Shares of Jefferies gained 2.1% to $19.46 ahead of Tuesday’s open, building on their 2012 surge of more than 38%.