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Lazard (LAZ) Up 4.2% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Lazard Ltd. (LAZ - Free Report) . Shares have added about 4.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lazard Q1 Earnings Beat
Lazard’s first-quarter 2017 adjusted earnings of $0.83 per share surpassed the Zacks Consensus Estimate by $0.03. The reported figure compared favorably with $0.50 earned in the prior-year quarter.
Earnings were primarily driven by higher revenues and improved AUM. However, higher operating expenses were on the downside.
Adjusted net income in the quarter came in at $110.1 million, up 65% year over year. On a GAAP basis, Lazard’s net income came in at $107.6 million or $0.81 per share, compared with $66.8 million or $0.50 per share in the year-earlier quarter.
Revenues Rise but Costs Escalate
Adjusted operating revenues for the quarter came in at $624.4 million, up 23% year over year. The upside can chiefly be attributed to an increase in financial advisory revenues as well as asset management revenues. Moreover, revenues easily surpassed the Zacks Consensus Estimate of $613 million.
Adjusted operating expenses were around $460.3 million in the quarter, up 15.2% year over year. Higher compensation and benefits expenses and non-compensation expenses were responsible for the increase.
Adjusted compensation and benefits expense jumped 18% on a year-over-year basis to $352.8 million. Adjusted non-compensation expense for the quarter was $107.5 million, up 6% year over year.
The ratio of compensation expense to operating revenues was 56.5% compared with 58.9% in the prior-year quarter. The ratio of non-compensation expense to operating revenues was 17.2% compared with 20.1% in the prior-year quarter.
Improved Segment Performance
Financial Advisory: The segment’s total revenue was $335.8 million, up 26% from the year-ago quarter. The rise was primarily due to an increase in strategic advisory and restructuring revenues.
Asset Management: The segment’s total revenue was $278.4 million, up 16% from the prior-year quarter. Higher management and incentive fees mainly led to the rise.
Corporate: The segment generated total revenue of $10.2 million, significantly up year over year.
AUM Improves
As of Mar 31, 2017, AUM was recorded at $215.2 billion, up 12.9% year over year. The company recorded net inflows of $3.3 billion during the quarter. Additionally, the quarter experienced market and foreign exchange appreciation of roughly $14 billion.
Average AUM came in at $206 billion, up 11.7% year over year.
Strong Balance Sheet
Lazard’s cash and cash equivalents were $8.9 billion as of Mar 31, 2017, compared with $1.2 billion as of Dec 31, 2016. The company’s stockholders’ equity was $1.2 billion, almost flat sequentially.
Steady Capital Deployment Activity
During the quarter, Lazard returned $360 million to its shareholders. This included dividend payment of $192 million, share repurchase of $106 million and $62 million paid for meeting employee tax obligations in exchange of share issuances upon vesting of equity grants.
Outlook
The company affirmed its annual targets of an adjusted non-compensation expense-to-revenue ratio between 16% and 20%, while the compensation-to-operating revenue ratio target is in the mid-to high 50 percentage range.
Looking forward, management estimates seasonally higher tax rate in the first half of 2017 with an annual tax rate to remain in the mid-to high-20% range for 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one upward revision for the current quarter. In the past month, the consensus estimate has shifted upward by 8.3% due to these changes.
At this time, Lazard's stock has an average Growth Score of 'C', though it is lagging a bit on the momentum frontwith a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Lazard (LAZ) Up 4.2% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Lazard Ltd. (LAZ - Free Report) . Shares have added about 4.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lazard Q1 Earnings Beat
Lazard’s first-quarter 2017 adjusted earnings of $0.83 per share surpassed the Zacks Consensus Estimate by $0.03. The reported figure compared favorably with $0.50 earned in the prior-year quarter.
Earnings were primarily driven by higher revenues and improved AUM. However, higher operating expenses were on the downside.
Adjusted net income in the quarter came in at $110.1 million, up 65% year over year. On a GAAP basis, Lazard’s net income came in at $107.6 million or $0.81 per share, compared with $66.8 million or $0.50 per share in the year-earlier quarter.
Revenues Rise but Costs Escalate
Adjusted operating revenues for the quarter came in at $624.4 million, up 23% year over year. The upside can chiefly be attributed to an increase in financial advisory revenues as well as asset management revenues. Moreover, revenues easily surpassed the Zacks Consensus Estimate of $613 million.
Adjusted operating expenses were around $460.3 million in the quarter, up 15.2% year over year. Higher compensation and benefits expenses and non-compensation expenses were responsible for the increase.
Adjusted compensation and benefits expense jumped 18% on a year-over-year basis to $352.8 million. Adjusted non-compensation expense for the quarter was $107.5 million, up 6% year over year.
The ratio of compensation expense to operating revenues was 56.5% compared with 58.9% in the prior-year quarter. The ratio of non-compensation expense to operating revenues was 17.2% compared with 20.1% in the prior-year quarter.
Improved Segment Performance
Financial Advisory: The segment’s total revenue was $335.8 million, up 26% from the year-ago quarter. The rise was primarily due to an increase in strategic advisory and restructuring revenues.
Asset Management: The segment’s total revenue was $278.4 million, up 16% from the prior-year quarter. Higher management and incentive fees mainly led to the rise.
Corporate: The segment generated total revenue of $10.2 million, significantly up year over year.
AUM Improves
As of Mar 31, 2017, AUM was recorded at $215.2 billion, up 12.9% year over year. The company recorded net inflows of $3.3 billion during the quarter. Additionally, the quarter experienced market and foreign exchange appreciation of roughly $14 billion.
Average AUM came in at $206 billion, up 11.7% year over year.
Strong Balance Sheet
Lazard’s cash and cash equivalents were $8.9 billion as of Mar 31, 2017, compared with $1.2 billion as of Dec 31, 2016. The company’s stockholders’ equity was $1.2 billion, almost flat sequentially.
Steady Capital Deployment Activity
During the quarter, Lazard returned $360 million to its shareholders. This included dividend payment of $192 million, share repurchase of $106 million and $62 million paid for meeting employee tax obligations in exchange of share issuances upon vesting of equity grants.
Outlook
The company affirmed its annual targets of an adjusted non-compensation expense-to-revenue ratio between 16% and 20%, while the compensation-to-operating revenue ratio target is in the mid-to high 50 percentage range.
Looking forward, management estimates seasonally higher tax rate in the first half of 2017 with an annual tax rate to remain in the mid-to high-20% range for 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one upward revision for the current quarter. In the past month, the consensus estimate has shifted upward by 8.3% due to these changes.
Lazard Ltd. Price and Consensus
Lazard Ltd. Price and Consensus | Lazard Ltd. Quote
VGM Scores
At this time, Lazard's stock has an average Growth Score of 'C', though it is lagging a bit on the momentum frontwith a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.