Warren Buffett holds about 41 stocks in the Berkshire Hathaway (NYSE:BRK.B) and one of them is Jefferies Financial (NYSE:JEF), an investment bank.
Because of its unique position on the earnings calendar, Jefferies serves as somewhat of a bellwether for the investment banking industry every quarter. It is the first to report earnings each quarter, even though its quarter ends a month earlier than the other major investment banks, like Goldman Sach, JPMorgan Chase, and Morgan Stanley – all of which report in a few weeks. Nonetheless, Jefferies results still give a good indication of what to expect.
Based on Jefferies’ results for its third quarter ended August 31, it could be a pretty good quarter for the industry. The investment bank easily beat earnings and revenue estimates.
The strong results were driven by a record quarter for its banking advisory business, which generated $656 million in revenue, up 43% from the previous quarter and up 11% year-over-year. Equity underwriting jumped 19% year-over-year to $181 million, while debt underwriting surged 36% to $249 million.
Overall investment banking revenue, including advisory and underwriting, was $1.13 billion, up 21% from the same quarter a year ago.
“Net revenues of $2.05 billion for the third quarter reflect continued growth in our market position amid a strengthening environment for our services,” Richard Handler, CEO, and Brian Friedman, president, said. “Our Investment Banking Advisory business delivered record quarterly results, driven by increased market share, the continued realization of our ongoing investments in human capital around the globe, and an improvement in the environment for mergers and acquisitions and capital formation.”
Also, capital markets revenue jumped 7% to $676 million while asset management soared 200% to $177 million.
Jefferies stock got a nice little pop from the earnings results, with the stock price up about 3% at the open.
It was not just for the strong earnings report; it is also due to an environment that appears favorable for M&A. With interest rates moving steadily lower, more deals will start to emerge as lower rates makes it cheaper to finance transactions.
This year, so far, has been the best year for M&A since 2021. In an interview with Reuters, Friedman said Jefferies’ pipeline suggests that deal-making will be even more active in 2026.
Jefferies got a price target upgrade from Morgan Stanley to $74 per share. It has a median price target of $79 per share, which suggests 18% growth. The stock is down about 15% year-to-date, trading at around $68 per share. It has a P/E ratio of 26, which is a little high given the subpar stock performance.
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