Jefferies Financial Group (JEF) is on track for its best advisory quarter on record, though the strength will have limited pull-through to earnings amid trading headwinds, UBS said in a note Thursday.
UBS said a large strategic deal that closed in early September is pulling forward advisory revenue into fiscal Q3, lifting its advisory estimate by 23% and implying record results for the franchise. UBS said the pull-forward comes at a cost, leaving the fourth quarter starting at a deficit and tracking well below consensus.
UBS said continued momentum in equity capital markets and equities trading should support results, but headwinds in debt capital markets and fixed-income trading off a low base will limit meaningful improvement in the comp ratio.
The firm kept its neutral rating on the stock but trimmed its price target to $61 from $65.
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