Jefferies Selloff on First Brands Exposure Seen 'Significantly Overdone,' Morgan Stanley Says

MT Newswires Live12-09

Jefferies Financial Group's (JEF) stock selloff on exposure to auto-parts maker First Brands, which filed for Chapter 11 bankruptcy, has been "significantly overdone," Morgan Stanley said Monday in a report.

Jefferies disclosed only $45 million of direct exposure to First Brands, or 0.5% of tangible book value, and any indirect effects, such as lower management fees or legal expenses, are "very manageable," the report said.

Morgan Stanley cited a "favorable" outlook for Jefferies, driven by a rebound in capital markets combined with substantial expansion in senior talent and prospects of gaining market share.

Fiscal Q4 results are expected in early January with Morgan Stanely modeling earnings per share of $0.85, down 16% from the previous quarter and 9% from a year earlier. The estimate is $0.14 below consensus, reflecting mark-to-market adjustments.

Morgan Stanley raised its earnings estimate by $0.08 to $4.58 for fiscal 2026 and by $0.09 to $6.31 for fiscal 2027, partly on higher equity underwriting.

Morgan Stanley upgraded Jefferies stock to overweight from equal weight and boosted its price target to $78 from $74.

Price: 59.37, Change: +0.25, Percent Change: +0.42

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