Jefferies Group said Tuesday its fiscal second-quarter earnings rose 37% on the back of record investment banking revenue.

The company reported a net income of 41 cents a share for the three months ended May 31 compared with 30 cents a share in the quarter ended June 30, 2009.

Jefferies' net revenues increased 13% to $670 million, versus $590 million, led by investment banking revenues, which more than doubled to $256 million from $121 million in the year-earlier period.

Net revenues rose 7% for the five months ended May 31, to $999 million from $932 million in the prior six-month period, while net income rose

“We are pleased with these solid quarterly results, as they were achieved during a volatile operating environment. Equities, fixed income and investment banking each contributed significantly by bringing quality ideas and execution to our global client base,” chairman and chief executive Richard B. Handler said in a press release.

Standard & Poors' reiterated its "buy" rating on the Jefferies' stock Tuesday, saying the investment bank's second-quarter earnings had beat its expectations for 36 cents a share.

"Trading results should continue to benefit from market volatility," the ratings agency said, noting that Jefferies' "backlog of capital markets transactions has improved, suggesting growth in advisory and underwriting results later this year."

While the firm's costs remain "elevated" as it expands, S&P said its margins can "widen modestly" as revenues grow.

S&P raised its forecast for Jefferies fiscal year 2010 results by 14 cents a share to $1.61 a share and increased its target for the company's share price by $2 to $29.

Jefferies shares were changing hands at $25.08 in late morning trading, up $2.21.

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