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Lazard's (LAZ) Shares Gain 1.5% Despite Q3 Earnings Miss
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LazardInc. (LAZ - Free Report) reported adjusted earnings of 86 cents per share, lagging the Zacks Consensus Estimate of 89 cents. However, the reported figure came in a penny higher than the prior-year quarter.
Shares of Lazard gained 1.5% post earnings release, reflecting investors’ optimism on the company’s successful efforts at reducing expenses. Also, slight rise in assets under management (AUM) was a positive. However, decline in revenues was an undermining factor.
Adjusted net income in the reported quarter came in at $111 million, down 1% year over year. On a GAAP basis, Lazard’s net income was $107 million or 82 cents per share compared with $109 million or 82 cents recorded in the prior-year quarter.
Revenues Decline, Cost Pressure Eases
In the third quarter, adjusted operating revenues came in at $605.6 million, down 3% year over year. This decline can chiefly be attributed to lower financial advisory and asset-management revenues.
Adjusted operating expenses were around $447.3 million in the quarter, down 3.8% year over year. Lower compensation and benefits, and non-compensation expenses resulted in the decline.
Adjusted compensation and benefits expenses declined 5% to $337.9 million. Adjusted non-compensation expenses for the quarter came in at $109.3 million, down 1% year over year.
The ratio of compensation expenses to operating revenues was 55.8%, down from 56.5% in the prior-year quarter. The ratio of non-compensation expenses to operating revenues was 18.1% compared with 17.6% reported in the year-ago quarter.
The company affirmed its annual target 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 $303.8 million, down 1% from the year-earlier quarter. The fall primarily stemmed from decrease in revenues from restructuring, partially offset by higher M&A advisory revenues.
Asset Management: The segment’s total revenues were $301.5 million, down 4% from the prior-year quarter. Higher management and other fees led to this rise.
Corporate: The segment generated total revenues of $314 million, significantly below revenues of $10 million a year ago.
Strong AUM
As of Sep 30, 2018, AUM was recorded at $240.1 billion, up nearly 1% year over year. The quarter experienced market and foreign exchange appreciation of $2.5 billion and net outflows of $288 million.
Average AUM came in at $239.9 billion, rising 2.6% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents totaled $1.13 billion as of Sep 30, 2018, compared with $1.48 billion recorded as of Dec 31, 2017. The company’s stockholders’ equity was $1.07 billion compared with $1.2 billion as of Dec 31, 2017.
Steady Capital-Deployment Activity
During the September-end quarter, Lazard returned $136 million to its shareholders. This included dividend payment of $53 million, share repurchase of $83 million.
Our Viewpoint
Lazard’s quarterly results do not reflect a strong quarter. Macro headwinds such as uncertainty in the market and stringent regulations strain the company’s financials. However, its diverse footprint along with cost control measures might offset the negatives in the quarters ahead.
Legg Mason reported a negative earnings surprise of 2.4% in second-quarter fiscal 2019 (ended Sep 30). The company reported adjusted net income of 81 cents per share, lagging the Zacks Consensus Estimate of 83 cents. However, results improved 2.5% year over year.
T. Rowe Price Group (TROW - Free Report) reported third-quarter 2018 adjusted earnings per share of $1.99, improving 37.2% from the year-ago figure of $1.45. The Zacks Consensus Estimate was $1.93.
Franklin Resources (BEN - Free Report) reported fourth-quarter fiscal 2018 (ended Sep 30) adjusted earnings of 79 cents per share, surpassing the Zacks Consensus Estimate of 74 cents. The reported figure compares favorably with the prior-year quarter figure of 76 cents.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Lazard's (LAZ) Shares Gain 1.5% Despite Q3 Earnings Miss
Lazard Inc. (LAZ - Free Report) reported adjusted earnings of 86 cents per share, lagging the Zacks Consensus Estimate of 89 cents. However, the reported figure came in a penny higher than the prior-year quarter.
Shares of Lazard gained 1.5% post earnings release, reflecting investors’ optimism on the company’s successful efforts at reducing expenses. Also, slight rise in assets under management (AUM) was a positive. However, decline in revenues was an undermining factor.
Adjusted net income in the reported quarter came in at $111 million, down 1% year over year. On a GAAP basis, Lazard’s net income was $107 million or 82 cents per share compared with $109 million or 82 cents recorded in the prior-year quarter.
Revenues Decline, Cost Pressure Eases
In the third quarter, adjusted operating revenues came in at $605.6 million, down 3% year over year. This decline can chiefly be attributed to lower financial advisory and asset-management revenues.
Adjusted operating expenses were around $447.3 million in the quarter, down 3.8% year over year. Lower compensation and benefits, and non-compensation expenses resulted in the decline.
Adjusted compensation and benefits expenses declined 5% to $337.9 million. Adjusted non-compensation expenses for the quarter came in at $109.3 million, down 1% year over year.
The ratio of compensation expenses to operating revenues was 55.8%, down from 56.5% in the prior-year quarter. The ratio of non-compensation expenses to operating revenues was 18.1% compared with 17.6% reported in the year-ago quarter.
The company affirmed its annual target 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 $303.8 million, down 1% from the year-earlier quarter. The fall primarily stemmed from decrease in revenues from restructuring, partially offset by higher M&A advisory revenues.
Asset Management: The segment’s total revenues were $301.5 million, down 4% from the prior-year quarter. Higher management and other fees led to this rise.
Corporate: The segment generated total revenues of $314 million, significantly below revenues of $10 million a year ago.
Strong AUM
As of Sep 30, 2018, AUM was recorded at $240.1 billion, up nearly 1% year over year. The quarter experienced market and foreign exchange appreciation of $2.5 billion and net outflows of $288 million.
Average AUM came in at $239.9 billion, rising 2.6% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents totaled $1.13 billion as of Sep 30, 2018, compared with $1.48 billion recorded as of Dec 31, 2017. The company’s stockholders’ equity was $1.07 billion compared with $1.2 billion as of Dec 31, 2017.
Steady Capital-Deployment Activity
During the September-end quarter, Lazard returned $136 million to its shareholders. This included dividend payment of $53 million, share repurchase of $83 million.
Our Viewpoint
Lazard’s quarterly results do not reflect a strong quarter. Macro headwinds such as uncertainty in the market and stringent regulations strain the company’s financials. However, its diverse footprint along with cost control measures might offset the negatives in the quarters ahead.
Lazard Ltd Price, Consensus and EPS Surprise
Lazard Ltd Price, Consensus and EPS Surprise | Lazard Ltd Quote
Currently, Lazard carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
Legg Mason reported a negative earnings surprise of 2.4% in second-quarter fiscal 2019 (ended Sep 30). The company reported adjusted net income of 81 cents per share, lagging the Zacks Consensus Estimate of 83 cents. However, results improved 2.5% year over year.
T. Rowe Price Group (TROW - Free Report) reported third-quarter 2018 adjusted earnings per share of $1.99, improving 37.2% from the year-ago figure of $1.45. The Zacks Consensus Estimate was $1.93.
Franklin Resources (BEN - Free Report) reported fourth-quarter fiscal 2018 (ended Sep 30) adjusted earnings of 79 cents per share, surpassing the Zacks Consensus Estimate of 74 cents. The reported figure compares favorably with the prior-year quarter figure of 76 cents.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>