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Lazard (LAZ) Q2 Earnings Beat on Higher Revenues, Shares Up
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Following the positive earnings surprise of 26.4% in second-quarter 2018, shares of LazardInc. (LAZ - Free Report) inched up 1.37%. The company reported adjusted earnings of $1.10 per share, comfortably surpassing the Zacks Consensus Estimate of 87 cents. Further, the reported figure came in higher than the prior-year quarter figure of 98 cents.
Top-line strength aided by strong M&A activities and growth in assets under management (AUM) were positives. However, escalating expenses was an undermining factor.
Adjusted net income in the reported quarter came in at $143 million, up 10% year over year. On a GAAP basis, Lazard’s net income came in at $147 million or $1.13 per share compared with $120 million or 91 cents recorded in the prior-year quarter.
Revenues Improve, Cost Pressure Persists
In the second quarter, adjusted operating revenues came in at $741 million, up 3% year over year. This upsurge can chiefly be attributed to increase in financial advisory and asset-management revenues.
Adjusted operating expenses were around $531.8 million in the quarter, up 1.7% year over year. Higher compensation and benefits, and non-compensation expenses resulted in the upswing.
Adjusted compensation and benefits expense flared up 2%, on a year-over-year basis, to $413.3 million. Adjusted non-compensation expense for the quarter came in at $118.5 million, up 2% year over year.
The ratio of compensation expense to operating revenues was 55.8%, down from 56.5% in the prior-year quarter. The ratio of non-compensation expense to operating revenues was 16% compared with 16.1% 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 $415 million, up 1% from the year-earlier quarter. The uptick primarily stemmed from increase in revenues from M&A advisory and restructuring revenues.
Asset Management: The segment’s total revenues were $329 million, up 7% from the prior-year quarter. Higher management and other fees led to this rise.
Corporate: The segment generated total negative revenues of $3.7 million compared with revenues of $2.5 million in the comparable period last year.
Strong Assets Under Management (AUM)
As of Jun 30, 2018, AUM was recorded at $238 billion, up 5% year over year. The quarter experienced market and foreign exchange depreciation of $9.96 billion and net outflows of $3.8 billion.
Average AUM came in at $245 billion, rising 10% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents totaled $845.2 million as of Jun 30, 2018, compared with $1.48 billion recorded as of Dec 31, 2017. The company’s stockholders’ equity was $1.06 billion compared with $1.2 billion as of Dec 31, 2017.
Steady Capital-Deployment Activity
During the June-end quarter, Lazard returned $139 million to its shareholders. This included dividend payment of $53 million, share repurchase of $78 million and $8 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 revenue strength position it favorably for the long run, macro headwinds, elevated costs pressure and stringent regulations strain the company’s financials.
BlackRock’s (BLK - Free Report) second-quarter 2018 adjusted earnings of $6.66 per share outpaced the Zacks Consensus Estimate of $6.60. Also, the bottom line came in 28% higher than the year-ago quarter. Results benefited from an improvement in revenues, rise in AUM and steady long-term inflows. However, an increase in operating expenses acted as a headwind.
SEI Investments Co.’s (SEIC - Free Report) Q2 earnings of 75 cents per share were in line with the Zacks Consensus Estimate. Also, the figure grew 32% from the year-earlier quarter. An increase in total revenues, partly offset by higher operating expenses, aided the company’s results. Also, AUM witnessed solid growth.
T. Rowe Price Group, Inc. (TROW - Free Report) reported second-quarter adjusted earnings per share of $1.87, improving 46.1% from the year-ago figure of $1.28. The Zacks Consensus Estimate was $1.80. Results were driven by higher revenues and AUM. However, escalating expenses were a concern.
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New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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Lazard (LAZ) Q2 Earnings Beat on Higher Revenues, Shares Up
Following the positive earnings surprise of 26.4% in second-quarter 2018, shares of Lazard Inc. (LAZ - Free Report) inched up 1.37%. The company reported adjusted earnings of $1.10 per share, comfortably surpassing the Zacks Consensus Estimate of 87 cents. Further, the reported figure came in higher than the prior-year quarter figure of 98 cents.
Top-line strength aided by strong M&A activities and growth in assets under management (AUM) were positives. However, escalating expenses was an undermining factor.
Adjusted net income in the reported quarter came in at $143 million, up 10% year over year. On a GAAP basis, Lazard’s net income came in at $147 million or $1.13 per share compared with $120 million or 91 cents recorded in the prior-year quarter.
Revenues Improve, Cost Pressure Persists
In the second quarter, adjusted operating revenues came in at $741 million, up 3% year over year. This upsurge can chiefly be attributed to increase in financial advisory and asset-management revenues.
Adjusted operating expenses were around $531.8 million in the quarter, up 1.7% year over year. Higher compensation and benefits, and non-compensation expenses resulted in the upswing.
Adjusted compensation and benefits expense flared up 2%, on a year-over-year basis, to $413.3 million. Adjusted non-compensation expense for the quarter came in at $118.5 million, up 2% year over year.
The ratio of compensation expense to operating revenues was 55.8%, down from 56.5% in the prior-year quarter. The ratio of non-compensation expense to operating revenues was 16% compared with 16.1% 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 $415 million, up 1% from the year-earlier quarter. The uptick primarily stemmed from increase in revenues from M&A advisory and restructuring revenues.
Asset Management: The segment’s total revenues were $329 million, up 7% from the prior-year quarter. Higher management and other fees led to this rise.
Corporate: The segment generated total negative revenues of $3.7 million compared with revenues of $2.5 million in the comparable period last year.
Strong Assets Under Management (AUM)
As of Jun 30, 2018, AUM was recorded at $238 billion, up 5% year over year. The quarter experienced market and foreign exchange depreciation of $9.96 billion and net outflows of $3.8 billion.
Average AUM came in at $245 billion, rising 10% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents totaled $845.2 million as of Jun 30, 2018, compared with $1.48 billion recorded as of Dec 31, 2017. The company’s stockholders’ equity was $1.06 billion compared with $1.2 billion as of Dec 31, 2017.
Steady Capital-Deployment Activity
During the June-end quarter, Lazard returned $139 million to its shareholders. This included dividend payment of $53 million, share repurchase of $78 million and $8 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 revenue strength position it favorably for the long run, macro headwinds, elevated costs pressure and stringent regulations strain the company’s financials.
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
BlackRock’s (BLK - Free Report) second-quarter 2018 adjusted earnings of $6.66 per share outpaced the Zacks Consensus Estimate of $6.60. Also, the bottom line came in 28% higher than the year-ago quarter. Results benefited from an improvement in revenues, rise in AUM and steady long-term inflows. However, an increase in operating expenses acted as a headwind.
SEI Investments Co.’s (SEIC - Free Report) Q2 earnings of 75 cents per share were in line with the Zacks Consensus Estimate. Also, the figure grew 32% from the year-earlier quarter. An increase in total revenues, partly offset by higher operating expenses, aided the company’s results. Also, AUM witnessed solid growth.
T. Rowe Price Group, Inc. (TROW - Free Report) reported second-quarter adjusted earnings per share of $1.87, improving 46.1% from the year-ago figure of $1.28. The Zacks Consensus Estimate was $1.80. Results were driven by higher revenues and AUM. However, escalating expenses were a concern.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>