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Jefferies Runs into Resistance After Earnings

JEF reported earnings of 17 cents per share, versus the Street's view of 14 cents per share

by 12/20/2011 1:05:43 PM
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Jefferies Group, Inc. (JEF - 14.37) released its quarterly results before the bell today. JEF said its fourth-quarter profit fell 23% to $48.4 million, or 21 cents per share, from last year's profit of $62.7 million, or 31 cents per share. Excluding items, earnings dropped to 17 cents per share. Meanwhile, revenue decreased 16% to $554 million. Results for the investment banking firm were mixed, though, as analysts' were calling for earnings of 14 cents per share on $562.4 million in revenue.

Separately, JEF also announced that its board of directors declared a quarterly dividend of $0.075 per share of common stock, which will be payable on Feb. 15, 2012 to stock holders that are on record by Jan. 17, 2012.

On the sentiment front, a majority of the brokerage bunch is bearish toward JEF. Zacks reports that 67% of analysts pegged the stock with a "hold" or worse recommendation.

There looks to be plenty of negativity elsewhere on Wall Street. Short interest skyrocketed by roughly 282% over the past month, and now makes up 14.9% of the equity's available float. In fact, it would take more than three sessions for all these bearish bets to unwind, at JEF's typical pace of trading.

Thanks to a better-than-expected bottom line, as well as news that the company reduced its total balance sheet by nearly 25%, JEF has surged more than 20% higher today; however, the overall technical backdrop remains bleak for the shares. On a relative-strength basis, the stock has lagged the broader S&P 500 Index (SPX) by nearly 11.3% over the past three months. From a longer-term perspective, the security has burned off nearly 55.7% throughout 2011.

Currently, JEF is running into resistance in the $14-$15 region, which has contained all of the shares' daily closes since the beginning of September. This area could trigger the next leg lower in the stock's overall descent.


Given JEF's weak long-term technical situation, and with familiar resistance looming overhead, JEF's earnings-inspired momentum could be short-lived.


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