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Rising Net Outflows, Concentration Risk Hurt Lazard (LAZ)
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On May 18, we issued an updated research report on Lazard Ltd. (LAZ - Free Report) . The company’s significant dependence on overseas revenues amid the coronavirus scare and a steady increase in net outflows are concerning. Also, heavy reliance on financial advisory revenues keeps us apprehensive.
The Zacks Consensus Estimate for Lazard’s current-year earnings has moved 56.7% downward over the past 60 days. The company currently carries a Zacks Rank #5 (Strong Sell).
Its shares have lost 34.2% over the past six months compared with the industry’s decline of 13.7%.
Lazard’s increased dependence on financial advisory revenues (nearly 52% of total revenues) could adversely impact its financials in the near term. This is because advisory fees are usually paid upon the successful completion of a transaction. Also, growing uncertainties in the markets on account of the coronavirus outbreak, and expectations of a global economic slowdown are likely to keep growth in advisory fees muted in the near term.
Net outflows have been rising steadily for the past several months. As of Mar 31, 2020, the AUM balance declined 18% year over year and net client cash outflows were $4.9 billion, driven mainly by outflows in equity and debt emerging markets as well as local equity strategies. We believe that a challenging operating backdrop and several geopolitical concerns might keep investors on the sidelines in the near term.
Though Lazard boasts an impressive capital-deployment plan, its debt/equity and dividend payout ratios seem unfavorable compared with the broader industry. Also, the company’s performance over the past few quarters has been volatile. Hence, we believe that capital-deployment activities might not be sustainable.
Further, Lazard is a geographically diversified company, with presence in almost all major global markets. The company is heavily dependent on overseas revenues, which account for nearly 43% of total operating revenues. A plethora of risks, stemming from the regulatory and political environment, foreign exchange fluctuations and performance of regional economy, can affect the top line.
Stocks to Consider
Tradeweb Markets Inc (TW - Free Report) has witnessed upward earnings estimate revisions for 2020 over the past 30 days. Moreover, this Zacks #1 Ranked (Strong Buy) stock has gained 39.2% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
GAIN Capital Holdings, Inc. current-year earnings estimate moved north in 30 days’ time. Further, the company’s shares have appreciated 57% over the past six months. At present, it sports a Zacks Rank of 1.
Mackinac Financial Corporation has witnessed upward earnings estimate revision for the ongoing year in the past 30 days. This Zacks #2 Ranked (Buy) stock has depreciated 38.7% over the past six months.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Rising Net Outflows, Concentration Risk Hurt Lazard (LAZ)
On May 18, we issued an updated research report on Lazard Ltd. (LAZ - Free Report) . The company’s significant dependence on overseas revenues amid the coronavirus scare and a steady increase in net outflows are concerning. Also, heavy reliance on financial advisory revenues keeps us apprehensive.
The Zacks Consensus Estimate for Lazard’s current-year earnings has moved 56.7% downward over the past 60 days. The company currently carries a Zacks Rank #5 (Strong Sell).
Its shares have lost 34.2% over the past six months compared with the industry’s decline of 13.7%.
Lazard’s increased dependence on financial advisory revenues (nearly 52% of total revenues) could adversely impact its financials in the near term. This is because advisory fees are usually paid upon the successful completion of a transaction. Also, growing uncertainties in the markets on account of the coronavirus outbreak, and expectations of a global economic slowdown are likely to keep growth in advisory fees muted in the near term.
Net outflows have been rising steadily for the past several months. As of Mar 31, 2020, the AUM balance declined 18% year over year and net client cash outflows were $4.9 billion, driven mainly by outflows in equity and debt emerging markets as well as local equity strategies. We believe that a challenging operating backdrop and several geopolitical concerns might keep investors on the sidelines in the near term.
Though Lazard boasts an impressive capital-deployment plan, its debt/equity and dividend payout ratios seem unfavorable compared with the broader industry. Also, the company’s performance over the past few quarters has been volatile. Hence, we believe that capital-deployment activities might not be sustainable.
Further, Lazard is a geographically diversified company, with presence in almost all major global markets. The company is heavily dependent on overseas revenues, which account for nearly 43% of total operating revenues. A plethora of risks, stemming from the regulatory and political environment, foreign exchange fluctuations and performance of regional economy, can affect the top line.
Stocks to Consider
Tradeweb Markets Inc (TW - Free Report) has witnessed upward earnings estimate revisions for 2020 over the past 30 days. Moreover, this Zacks #1 Ranked (Strong Buy) stock has gained 39.2% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
GAIN Capital Holdings, Inc. current-year earnings estimate moved north in 30 days’ time. Further, the company’s shares have appreciated 57% over the past six months. At present, it sports a Zacks Rank of 1.
Mackinac Financial Corporation has witnessed upward earnings estimate revision for the ongoing year in the past 30 days. This Zacks #2 Ranked (Buy) stock has depreciated 38.7% over the past six months.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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