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Lazard (LAZ) Q2 Earnings Beat on Lower Expenses, Shares Up
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Following the positive earnings surprise of 15.9% in second-quarter 2019, shares of Lazard (LAZ - Free Report) rallied 2.36%. The company reported adjusted earnings of 73 cents per share, comfortably surpassing the Zacks Consensus Estimate of 63 cents. However, the reported figure comes in lower than the prior-year quarter’s reported figure of $1.10.
Decline in expenses dsiplayed prudent cost management. Assets under management (AUM) remained stable. However, lower revenues were an undermining factor.
Adjusted net income in the reported quarter came in at $86 million, plunging 40% year over year. On a GAAP basis, Lazard’s net income came in at $66 million or 55 cents per share compared with $147 million or $1.13 recorded in the prior-year quarter.
Revenues Down, Costs Fall
In the second quarter, adjusted operating revenues came in at $630 million, down 15% year over year. This downside chiefly resulted from decrease in financial advisory and asset-management revenues.
Adjusted operating expenses were around $490.1 million in the quarter, down 7.8% year over year. Lower compensation and benefits, partly offset by higher non-compensation expenses resulted in the decline.
Adjusted compensation and benefits expense declined 12%, on a year-over-year basis, to $362.1 million. Adjusted non-compensation expense for the quarter came in at $128 million, up 8% year over year.
The ratio of compensation expense to operating revenues was 57.5%, up from the prior-year quarter’s 55.8%. The ratio of non-compensation expense to operating revenues was 20.3% compared with 16% reported in the year-ago quarter.
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.
Segment Performance
Financial Advisory: The segment’s total revenues came in at record $328.8 million, down 21% from the year-earlier quarter. This decline primarily stemmed from decrease in revenues from M&A advisory and restructuring revenues.
Asset Management: The segment’s total revenues were $291.3 million, down 12% from the prior-year quarter. Higher management and other fees led to this upside.
Corporate: The segment generated total negative revenues of $9.6 million compared with negative revenues of $3.7 million in the comparable period last year.
Stable Assets Under Management (AUM)
As of Jun 30, 2019, AUM was recorded at $237 billion, in line with the prior-year quarter. The quarter witnessed market and foreign exchange appreciation of $7.7 billion and net outflows of $5.2 billion.
Average AUM came in at $237 billion, down 3% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents totaled $919 million as of Jun 30, 2019, compared with $1.25 billion recorded as of Dec 31, 2018. The company’s stockholders’ equity was $717.9 million compared with $970.1 million as of Dec 31, 2018.
Steady Capital-Deployment Activity
During the April-June quarter, Lazard returned $217 million to its shareholders. This included dividend payment of $52 million, share repurchase of $160 million and $5 million paid for meeting employee-tax obligations in exchange of share issuances upon vesting of equity grants.
Our Viewpoint
Results reflect an impressive quarter for Lazard. Though the company’s diverse footprint, steady capital-deployment activities and controlled expenses position it favorably for the long haul, macro headwinds, top-line pressure and stringent regulations strain the company’s financials.
Blackstone (BX - Free Report) reported second-quarter distributable earnings of 57 cents, beating the Zacks Consensus Estimate of 50 cents. Moreover, the figure reflected improvement from 56 cents earned in the prior-year quarter. Results benefited from growth in AUM and lower expenses. However, a decline in revenues acted as a headwind.
T. Rowe Price Group, Inc. (TROW - Free Report) reported a positive earnings surprise of 6.3% in second-quarter 2019. Adjusted earnings per share came in at $2.03, outpacing the Zacks Consensus Estimate of $1.91. Results also improved 14.7% from the year-ago figure of $1.77. Results were driven by higher AUM and revenues. However, escalating expenses was an undermining factor.
BlackRock, Inc.’s (BLK - Free Report) second-quarter adjusted earnings of $6.41 per share lagged the Zacks Consensus Estimate of $6.52. Moreover, the figure was 3.8% lower than the year-ago quarter’s number. Results were hurt by a decline in revenues along with higher expenses. Nevertheless, growth in AUM supported results to some extent.
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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
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Lazard (LAZ) Q2 Earnings Beat on Lower Expenses, Shares Up
Following the positive earnings surprise of 15.9% in second-quarter 2019, shares of Lazard (LAZ - Free Report) rallied 2.36%. The company reported adjusted earnings of 73 cents per share, comfortably surpassing the Zacks Consensus Estimate of 63 cents. However, the reported figure comes in lower than the prior-year quarter’s reported figure of $1.10.
Decline in expenses dsiplayed prudent cost management. Assets under management (AUM) remained stable. However, lower revenues were an undermining factor.
Adjusted net income in the reported quarter came in at $86 million, plunging 40% year over year. On a GAAP basis, Lazard’s net income came in at $66 million or 55 cents per share compared with $147 million or $1.13 recorded in the prior-year quarter.
Revenues Down, Costs Fall
In the second quarter, adjusted operating revenues came in at $630 million, down 15% year over year. This downside chiefly resulted from decrease in financial advisory and asset-management revenues.
Adjusted operating expenses were around $490.1 million in the quarter, down 7.8% year over year. Lower compensation and benefits, partly offset by higher non-compensation expenses resulted in the decline.
Adjusted compensation and benefits expense declined 12%, on a year-over-year basis, to $362.1 million. Adjusted non-compensation expense for the quarter came in at $128 million, up 8% year over year.
The ratio of compensation expense to operating revenues was 57.5%, up from the prior-year quarter’s 55.8%. The ratio of non-compensation expense to operating revenues was 20.3% compared with 16% reported in the year-ago quarter.
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.
Segment Performance
Financial Advisory: The segment’s total revenues came in at record $328.8 million, down 21% from the year-earlier quarter. This decline primarily stemmed from decrease in revenues from M&A advisory and restructuring revenues.
Asset Management: The segment’s total revenues were $291.3 million, down 12% from the prior-year quarter. Higher management and other fees led to this upside.
Corporate: The segment generated total negative revenues of $9.6 million compared with negative revenues of $3.7 million in the comparable period last year.
Stable Assets Under Management (AUM)
As of Jun 30, 2019, AUM was recorded at $237 billion, in line with the prior-year quarter. The quarter witnessed market and foreign exchange appreciation of $7.7 billion and net outflows of $5.2 billion.
Average AUM came in at $237 billion, down 3% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents totaled $919 million as of Jun 30, 2019, compared with $1.25 billion recorded as of Dec 31, 2018. The company’s stockholders’ equity was $717.9 million compared with $970.1 million as of Dec 31, 2018.
Steady Capital-Deployment Activity
During the April-June quarter, Lazard returned $217 million to its shareholders. This included dividend payment of $52 million, share repurchase of $160 million and $5 million paid for meeting employee-tax obligations in exchange of share issuances upon vesting of equity grants.
Our Viewpoint
Results reflect an impressive quarter for Lazard. Though the company’s diverse footprint, steady capital-deployment activities and controlled expenses position it favorably for the long haul, macro headwinds, top-line pressure and stringent regulations strain the company’s financials.
Lazard Ltd Price, Consensus and EPS Surprise
Lazard Ltd price-consensus-eps-surprise-chart | Lazard Ltd Quote
Currently, Lazard carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
Blackstone (BX - Free Report) reported second-quarter distributable earnings of 57 cents, beating the Zacks Consensus Estimate of 50 cents. Moreover, the figure reflected improvement from 56 cents earned in the prior-year quarter. Results benefited from growth in AUM and lower expenses. However, a decline in revenues acted as a headwind.
T. Rowe Price Group, Inc. (TROW - Free Report) reported a positive earnings surprise of 6.3% in second-quarter 2019. Adjusted earnings per share came in at $2.03, outpacing the Zacks Consensus Estimate of $1.91. Results also improved 14.7% from the year-ago figure of $1.77. Results were driven by higher AUM and revenues. However, escalating expenses was an undermining factor.
BlackRock, Inc.’s (BLK - Free Report) second-quarter adjusted earnings of $6.41 per share lagged the Zacks Consensus Estimate of $6.52. Moreover, the figure was 3.8% lower than the year-ago quarter’s number. Results were hurt by a decline in revenues along with higher expenses. Nevertheless, growth in AUM supported results to some extent.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>