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Lazard Stock Touches 52-Week High: What Should Investors Do?
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Lazard, Inc. (LAZ - Free Report) shares touched a 52-week high of $51.46 on Wednesday. The stock closed the session a little lower at $50.15, gaining 21.2% in the past six months.
The stock has outperformed the industry and its peers like Franklin Resources, Inc. (BEN - Free Report) and BlackRock, Inc. (BLK - Free Report) in the same time frame.
Six-Months Price Performance Chart
Image Source: Zacks Investment Research
The company's emphasis on strategic alliances to enhance assets under management (AUM) balance, combined with its strong revenue growth and ongoing cost-containment measures, continues to strengthen its financial performance.
Factors Supporting LAZ’s Performance
Strategic Alliances Aid AUM growth: LAZ is growing through strategic partnerships and acquisitions. In April 2024, Lazard signed a strategic partnership agreement with Elaia Partners, an established European venture capital firm. This partnership launched a new asset management service, providing private market solutions within the technology sector.
During the second quarter, the company established Lazard Elaia Capital, a strategic partnership in Europe that will launch a growth capital fund to invest in private companies within the technology industry. This move aligns with the company's long-term strategy to meet evolving client needs by providing private markets, alternative investments and wealth management solutions while capitalizing on opportunities in liquid public markets.
In March 2023, the company acquired Truvvo Partners with $3.8 billion of AUM to expand its asset management business. This partnership provides comprehensive advice and investment solutions across both public and private markets.
Through such initiatives, Lazard has significantly increased its AUM balance and is likely to maintain the momentum in the near term. While the AUM balance declined in 2022 due to a challenging economic backdrop, the metric witnessed a compound annual growth rate (CAGR) of 3.2% over the seven years (2016-2023). The uptrend continued in the first half of 2024.
Revenue Strength: Organic growth remains a key strength at Lazard, as reflected by its revenue growth trend. Though operating revenues declined in 2022 and 2023 on a tough macroeconomic backdrop, the metric witnessed a CAGR of 1.2% over the past seven-year period ending in 2023. The uptrend continued in the first half of 2024.
The diversified AUM mix in the Asset Management segment is poised to drive the company’s overall revenue growth. Also, a resurgence in the deal-making activity will offer support to the top line in the upcoming period.
Management remains focused on its strategic initiative of doubling revenues by 2030 and delivering an average annual shareholder return of 10-15% through the same time frame.
Cost-Containment Measures: The company is diligently working on its cost-containment measures. While the company witnessed a decline in expenses in 2020 and 2022, the metric rose in 2021 and 2023. The company’s expenses remained flat in the first half of 2024. Nonetheless, the company’s strategic efforts to cost saving will restore its historical profitability ranges in the upcoming period.
Also, the company has set a target to maintain a compensation ratio in the mid-to-high 50% range and a non-compensation ratio in the band of 16-20% in the near term.
Concerns Prevailing for LAZ
Continuous Net Outflows: Lazard faces challenges with net outflows, primarily in the equity asset class. The company witnessed net outflows of $11.4 billion in 2020, $11.6 billion in 2021, $16.9 billion in 2022 and $3.5 billion in 2023. In the first half of 2024, net outflows were $13.2 billion.
The company’s investment strategies in global and local markets, as well as in other emerging markets in both equities and fixed-income asset classes, are likely to support AUM growth to some extent. However, owing to the current challenging operating backdrop, any equity outflows in the emerging markets will be a hindrance in the near term.
Unsustainable Capital Distribution: Lazard’s capital distribution activities keep us apprehensive. The company currently pays a dividend of 50 cents per share on its outstanding common stock, having increased its dividend only once in the past five years. At present, LAZ's dividend payout ratio stands at 103%, which appears unsustainable in the long term, and has an annualized dividend growth rate of just 1.80%. Furthermore, its debt-to-equity ratio of 3.60% is significantly higher than the industry average of 0.21%.
Hence, given these unfavorable factors, we believe that the capital distribution activities might not be sustainable.
On the flip side, its competitors like BEN and BLK seem to have a sustainable capital distribution plan. At present, BEN and BLK have a payout ratio of 47% and 50%, respectively. Both companies increased their dividend five times in the past five years.
Parting Thoughts on LAZ
Lazard’s strategic alliances, rising AUM balances and diligent cost-containment measures will support its financials in the upcoming period.
Sales Estimate
Image Source: Zacks Investment Research
EPS Estimate
Image Source: Zacks Investment Research
P/E F12M
Image Source: Zacks Investment Research
Lazard stock appears inexpensive relative to the industry. The company is currently trading at the 12-month trailing price-to-earnings (P/E) F12M ratio of 13.27, lower than the industry’s 14.64.
Though the company’s long-term prospects seem bright, its continued net outflows and high debt-to-equity ratios remain a concern. Prospective investors should have this Zacks Rank #3 (Hold) stock on their radar and watch how the company navigates through these challenges to optimize financial performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Lazard Stock Touches 52-Week High: What Should Investors Do?
Lazard, Inc. (LAZ - Free Report) shares touched a 52-week high of $51.46 on Wednesday. The stock closed the session a little lower at $50.15, gaining 21.2% in the past six months.
The stock has outperformed the industry and its peers like Franklin Resources, Inc. (BEN - Free Report) and BlackRock, Inc. (BLK - Free Report) in the same time frame.
Six-Months Price Performance Chart
Image Source: Zacks Investment Research
The company's emphasis on strategic alliances to enhance assets under management (AUM) balance, combined with its strong revenue growth and ongoing cost-containment measures, continues to strengthen its financial performance.
Factors Supporting LAZ’s Performance
Strategic Alliances Aid AUM growth: LAZ is growing through strategic partnerships and acquisitions. In April 2024, Lazard signed a strategic partnership agreement with Elaia Partners, an established European venture capital firm. This partnership launched a new asset management service, providing private market solutions within the technology sector.
During the second quarter, the company established Lazard Elaia Capital, a strategic partnership in Europe that will launch a growth capital fund to invest in private companies within the technology industry. This move aligns with the company's long-term strategy to meet evolving client needs by providing private markets, alternative investments and wealth management solutions while capitalizing on opportunities in liquid public markets.
In March 2023, the company acquired Truvvo Partners with $3.8 billion of AUM to expand its asset management business. This partnership provides comprehensive advice and investment solutions across both public and private markets.
Through such initiatives, Lazard has significantly increased its AUM balance and is likely to maintain the momentum in the near term. While the AUM balance declined in 2022 due to a challenging economic backdrop, the metric witnessed a compound annual growth rate (CAGR) of 3.2% over the seven years (2016-2023). The uptrend continued in the first half of 2024.
Revenue Strength: Organic growth remains a key strength at Lazard, as reflected by its revenue growth trend. Though operating revenues declined in 2022 and 2023 on a tough macroeconomic backdrop, the metric witnessed a CAGR of 1.2% over the past seven-year period ending in 2023. The uptrend continued in the first half of 2024.
The diversified AUM mix in the Asset Management segment is poised to drive the company’s overall revenue growth. Also, a resurgence in the deal-making activity will offer support to the top line in the upcoming period.
Management remains focused on its strategic initiative of doubling revenues by 2030 and delivering an average annual shareholder return of 10-15% through the same time frame.
Cost-Containment Measures: The company is diligently working on its cost-containment measures. While the company witnessed a decline in expenses in 2020 and 2022, the metric rose in 2021 and 2023. The company’s expenses remained flat in the first half of 2024. Nonetheless, the company’s strategic efforts to cost saving will restore its historical profitability ranges in the upcoming period.
Also, the company has set a target to maintain a compensation ratio in the mid-to-high 50% range and a non-compensation ratio in the band of 16-20% in the near term.
Concerns Prevailing for LAZ
Continuous Net Outflows: Lazard faces challenges with net outflows, primarily in the equity asset class. The company witnessed net outflows of $11.4 billion in 2020, $11.6 billion in 2021, $16.9 billion in 2022 and $3.5 billion in 2023. In the first half of 2024, net outflows were $13.2 billion.
The company’s investment strategies in global and local markets, as well as in other emerging markets in both equities and fixed-income asset classes, are likely to support AUM growth to some extent. However, owing to the current challenging operating backdrop, any equity outflows in the emerging markets will be a hindrance in the near term.
Unsustainable Capital Distribution: Lazard’s capital distribution activities keep us apprehensive. The company currently pays a dividend of 50 cents per share on its outstanding common stock, having increased its dividend only once in the past five years. At present, LAZ's dividend payout ratio stands at 103%, which appears unsustainable in the long term, and has an annualized dividend growth rate of just 1.80%. Furthermore, its debt-to-equity ratio of 3.60% is significantly higher than the industry average of 0.21%.
Hence, given these unfavorable factors, we believe that the capital distribution activities might not be sustainable.
On the flip side, its competitors like BEN and BLK seem to have a sustainable capital distribution plan. At present, BEN and BLK have a payout ratio of 47% and 50%, respectively. Both companies increased their dividend five times in the past five years.
Parting Thoughts on LAZ
Lazard’s strategic alliances, rising AUM balances and diligent cost-containment measures will support its financials in the upcoming period.
Sales Estimate
Image Source: Zacks Investment Research
EPS Estimate
Image Source: Zacks Investment Research
P/E F12M
Image Source: Zacks Investment Research
Lazard stock appears inexpensive relative to the industry. The company is currently trading at the 12-month trailing price-to-earnings (P/E) F12M ratio of 13.27, lower than the industry’s 14.64.
Though the company’s long-term prospects seem bright, its continued net outflows and high debt-to-equity ratios remain a concern. Prospective investors should have this Zacks Rank #3 (Hold) stock on their radar and watch how the company navigates through these challenges to optimize financial performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.