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Jefferies Group Inc. (NYSE: JEF), a middle market investment bank, showed that it can deal with the treacherous credit crunch. While its latest quarterly report showed a 16% drop in revenues to $392 million, it wasn't as bad as the Street expected (the consensus estimate was $275 million). Taking out some charges, earnings came to $0.04 per share (the Street estimate was a loss of $0.16).
The major weakness came from the investment banking. However, there was strength on the trading side, such as with junk bonds.
Basically, Jefferies has taken a number of steps to maintain liquidity and protect its capital base. In fact, in April the company got a $434 million capital infusion from Leucadia National.
With a strong balance sheet, Jefferies is in a nice position to continue posting trading gains -- but also to perhaps buy up some companies and hire top employees.
Something else: as the financial services industry consolidates -- just look at JPMorgan's (NYSE: JPM) purchase of Bear Stearns -- there should be less competition for Jefferies' middle-market space.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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