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Lazard (LAZ) Q4 Earnings Impress on High Revenue; Costs Up
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Lazard Ltd. (LAZ - Free Report) reported a positive surprise of 14.1% in fourth-quarter 2016. The company reported adjusted earnings of $1.13 per share, surpassing the Zacks Consensus Estimate of 99 cents. Moreover, the reported figure compared favorably with 92 cents earned in the prior-year quarter.
Results were driven by higher revenues on the back of higher M&A (mergers and acquisitions) advisory activity. Furthermore, rise in AUM was a favorable factor. However, escalating expenses reflected absence of prudent expense management.
Adjusted net income in the quarter came in at $150 million, up 22% year over year. On a GAAP basis, Lazard’s net income came in at $128 million or 96 cents per share, compared with $158 million or $1.18 in the year-earlier quarter.
For 2016, adjusted net income was $410 million or $3.09 per share, compared with $480 million or $3.60 in the year-ago quarter. On a GAAP basis, net income came in at $388 million or $2.92 per share, compared with $986 million or $7.40 in the prior-year quarter.
Revenue Rises; Costs Escalate
For 2016, adjusted operating revenues were $2.34 billion, down 2% year over year. In addition, revenues missed the Zacks Consensus Estimate of $2.37 billion.
In the fourth quarter, adjusted operating revenues came in at $685 million, up 15% year over year. The upsurge can chiefly be attributed to an increase in financial advisory revenues as well as asset management revenues. However, revenues slightly lagged the Zacks Consensus Estimate of $689 million.
Adjusted operating expenses were around $491 million in the quarter, up 10.7% year over year. Higher compensation and benefits expenses were partly mitigated by lower non-compensation expenses.
Adjusted compensation and benefits expense jumped 15% on a year-over-year basis to $375.9 million. Adjusted non-compensation expense for the quarter was $115 million, down 1% year over year.
The ratio of compensation expense to operating revenue was 54.9% compared with 54.8% in the prior-year quarter. The ratio of non-compensation expense to operating revenue was 16.8% compared with 19.3% in the prior-year 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 revenue was $405 million, up 22% from the year-ago quarter. The rise was primarily due to increase in revenues from strategic advisory and higher restructuring revenues.
Asset Management: The segment’s total revenue was $275 million, up 6% from the prior-year quarter. Higher management and incentive fees mainly led to the rise.
Corporate: The segment generated total revenue of $5.3 million, down 22% year over year.
Increased Assets Under Management (AUM)
As of Dec 31, 2016, AUM was recorded at $198 billion, up 6% year over year. The company recorded net outflows of $2.7 billion in the reported quarter. Additionally, the quarter experienced market and foreign exchange depreciation of $4.8 billion.
Average AUM came in at $200 billion, up 7% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents were $1.16 billion as of Dec 31, 2016, compared with $1.13 billion as of Dec 31, 2015. The company’s stockholders’ equity was $1.24 billion compared with $1.31 billion as of Dec 31, 2015.
Steady Capital Deployment Activity
During 2016, Lazard returned $692 million to its shareholders. This included dividend payment of $336 million, share repurchase of $300 million and $56 million paid for meeting employee tax obligations in exchange of share issuances upon vesting of equity grants.
Our Viewpoint
Results reflect a decent quarter for Lazard. Though the company’s diverse footprint, steady capital deployment activities and top-line performance position it favorably over the long run; macro headwinds, escalating costs and stringent regulations put the company’s financials under strain.
T. Rowe Price Group, Inc. (TROW - Free Report) reported negative earnings surprise of 14.2% for fourth-quarter 2016. Adjusted earnings per share of $1.21 missed the Zacks Consensus Estimate of $1.41. However, the bottom line improved 13.1% from the year-ago earnings of $1.07.
Federated Investors, Inc. posted a positive earnings surprise of around 2% for fourth-quarter 2016, marking the seventh straight quarter of an earnings beat. Earnings per share of 52 cents beat the Zacks Consensus Estimate by a penny and also improved 13%, year over year, from 46 cents.
Driven by lower expenses, Franklin Resources Inc. (BEN - Free Report) recorded a positive earnings surprise of 13.2% in first-quarter fiscal 2017. The company reported earnings of 77 cents per share, beating the Zacks Consensus Estimate of 68 cents. Moreover, results compared favorably with the prior-year quarter earnings of 74 cents per share.
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Lazard (LAZ) Q4 Earnings Impress on High Revenue; Costs Up
Lazard Ltd. (LAZ - Free Report) reported a positive surprise of 14.1% in fourth-quarter 2016. The company reported adjusted earnings of $1.13 per share, surpassing the Zacks Consensus Estimate of 99 cents. Moreover, the reported figure compared favorably with 92 cents earned in the prior-year quarter.
Results were driven by higher revenues on the back of higher M&A (mergers and acquisitions) advisory activity. Furthermore, rise in AUM was a favorable factor. However, escalating expenses reflected absence of prudent expense management.
Adjusted net income in the quarter came in at $150 million, up 22% year over year. On a GAAP basis, Lazard’s net income came in at $128 million or 96 cents per share, compared with $158 million or $1.18 in the year-earlier quarter.
For 2016, adjusted net income was $410 million or $3.09 per share, compared with $480 million or $3.60 in the year-ago quarter. On a GAAP basis, net income came in at $388 million or $2.92 per share, compared with $986 million or $7.40 in the prior-year quarter.
Revenue Rises; Costs Escalate
For 2016, adjusted operating revenues were $2.34 billion, down 2% year over year. In addition, revenues missed the Zacks Consensus Estimate of $2.37 billion.
In the fourth quarter, adjusted operating revenues came in at $685 million, up 15% year over year. The upsurge can chiefly be attributed to an increase in financial advisory revenues as well as asset management revenues. However, revenues slightly lagged the Zacks Consensus Estimate of $689 million.
Adjusted operating expenses were around $491 million in the quarter, up 10.7% year over year. Higher compensation and benefits expenses were partly mitigated by lower non-compensation expenses.
Adjusted compensation and benefits expense jumped 15% on a year-over-year basis to $375.9 million. Adjusted non-compensation expense for the quarter was $115 million, down 1% year over year.
The ratio of compensation expense to operating revenue was 54.9% compared with 54.8% in the prior-year quarter. The ratio of non-compensation expense to operating revenue was 16.8% compared with 19.3% in the prior-year 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 revenue was $405 million, up 22% from the year-ago quarter. The rise was primarily due to increase in revenues from strategic advisory and higher restructuring revenues.
Asset Management: The segment’s total revenue was $275 million, up 6% from the prior-year quarter. Higher management and incentive fees mainly led to the rise.
Corporate: The segment generated total revenue of $5.3 million, down 22% year over year.
Increased Assets Under Management (AUM)
As of Dec 31, 2016, AUM was recorded at $198 billion, up 6% year over year. The company recorded net outflows of $2.7 billion in the reported quarter. Additionally, the quarter experienced market and foreign exchange depreciation of $4.8 billion.
Average AUM came in at $200 billion, up 7% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents were $1.16 billion as of Dec 31, 2016, compared with $1.13 billion as of Dec 31, 2015. The company’s stockholders’ equity was $1.24 billion compared with $1.31 billion as of Dec 31, 2015.
Steady Capital Deployment Activity
During 2016, Lazard returned $692 million to its shareholders. This included dividend payment of $336 million, share repurchase of $300 million and $56 million paid for meeting employee tax obligations in exchange of share issuances upon vesting of equity grants.
Our Viewpoint
Results reflect a decent quarter for Lazard. Though the company’s diverse footprint, steady capital deployment activities and top-line performance position it favorably over the long run; macro headwinds, escalating costs and stringent regulations put the company’s financials under strain.
Lazard Ltd. Price, Consensus and EPS Surprise
Lazard Ltd. Price, Consensus and EPS Surprise | 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
T. Rowe Price Group, Inc. (TROW - Free Report) reported negative earnings surprise of 14.2% for fourth-quarter 2016. Adjusted earnings per share of $1.21 missed the Zacks Consensus Estimate of $1.41. However, the bottom line improved 13.1% from the year-ago earnings of $1.07.
Federated Investors, Inc. posted a positive earnings surprise of around 2% for fourth-quarter 2016, marking the seventh straight quarter of an earnings beat. Earnings per share of 52 cents beat the Zacks Consensus Estimate by a penny and also improved 13%, year over year, from 46 cents.
Driven by lower expenses, Franklin Resources Inc. (BEN - Free Report) recorded a positive earnings surprise of 13.2% in first-quarter fiscal 2017. The company reported earnings of 77 cents per share, beating the Zacks Consensus Estimate of 68 cents. Moreover, results compared favorably with the prior-year quarter earnings of 74 cents per share.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>