Goldman Has Sell Rating On Jefferies Group Inc. (JEF)

Goldman Sachs has a Sell rating and a $23 price target on shares of Jefferies Group Inc. JEF. In a note sent to clients, Goldman writes, "JEF reported F4Q10 EPS of $0.35, ahead of consensus of $0.32 and the GS estimate of $0.29. The upside owed to better than estimated results out of FICC, despite operating in a tough trading market especially late in F4Q10, though this success was met with increased minority interest attributable to the joint venture with Leucadia in high yield trading. Investment banking was broadly better than expected, and the firm characterized the backlog as healthy. The ROE of 10.1% in F2010 was about 100 bp lower than 2009, and reflects the continued build-out of the franchise by sector and geography, a trend that is likely to persist in F2011, and thus near-term results are likely to be softer than the longer-term earnings power of the franchise. Thus, while we raise our F2011-12 EPS estimates to $1.50/1.70 from $1.45/1.65 and introduce a F2013 estimate of $1.90 (and raise our 6-month target price to $23 from $22), we note JEF trades well above peers and historical trends and do not see upside in the shares at these levels." Shares of JEF closed at $26.24 yesterday.