Lazard Ltd (LAZ - Free Report) reported third-quarter 2021 adjusted earnings of 98 cents per share, beating the Zacks Consensus Estimate of 94 cents. The reported figure also reflects 46% year-over-year growth.
Higher revenues and growth in assets under management (AUM) favored the company. However, operating expenses witnessed a rise. Most likely due to this, shares of the company gained 6.6%, following the earnings release.
Adjusted net income in the reported quarter was $111.4 million, up 46% year over year. On a GAAP basis, Lazard’s net income came in at $107.2 million or 94 cents per share compared with the $75 million or 66 cents recorded in the prior-year quarter.
Revenues Rise, Expenses Flare Up
During the third quarter, adjusted operating revenues totaled a record $701.64 million, up 23% year over year. This upside resulted from an increase in asset management and financial advisory revenues. The reported figure also outpaced the Zacks Consensus Estimate of $830.83 million.
Adjusted operating expenses came in at $534.2 million in the quarter, up 20% year over year. Higher compensation and benefits as well as non-compensation expense resulted in this upsurge.
Adjusted compensation and benefits expenses rose 22% on a year-over-year basis to $417.5 million. Adjusted non-compensation expenses for the quarter were $116.7 million, up 13% year over year.
The ratio of compensation expenses to operating revenues was 59.5%, down from the year-earlier quarter’s 60%. The ratio of non-compensation expenses to operating revenues was 16.6% compared with the year-ago quarter’s 18.1%.
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 adjusted revenues were $381.3 million, up 24% from the year-earlier quarter.
Asset Management: The segment’s adjusted revenues were $310.6 million, up 19% from the prior-year quarter.
Corporate: The segment generated $9.8 million adjusted revenues, up substantially from the prior-year quarter.
Growing AUM
As of Sep 30, 2021, AUM was recorded at $272.6 billion, up 5.4% from the prior-year quarter. The quarter witnessed a market depreciation and foreign-exchange depreciation of $2.5 billion and net outflows of $2.3 billion.
Average AUM came in at $277.9 billion, up 23% year over year.
Deteriorating Balance Sheet
Lazard’s cash and cash equivalents totaled $1.18 billion as of Sep 30, 2021, compared with $1.39 billion as of Dec 31, 2020. The company’s stockholders’ equity was $977.7 million compared with $999.4 million as of Dec 31, 2020.
Steady Capital-Deployment Activity
In the third quarter, Lazard repurchased 1.1 million shares at an average cost of $46.01 per share and paid out dividends of $49 million. As of the third-quarter end, the company had $314 million remaining in its share-repurchase authorization.
Our Viewpoint
Results reflect Lazard’s impressive performance during the September-end quarter. Although diverse footprint, steady capital-deployment activities and revenue growth position the company favorably for the long haul; macro headwinds, elevated expenses and overall outflows are straining its financials.
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, Inc.’s (BLK - Free Report) third-quarter 2021 adjusted earnings of $10.95 per share outpaced the Zacks Consensus Estimate of $9.63. The figure reflects a rise of 18.8% from the year-ago quarter’s number.
Blackstone’s (BX - Free Report) distributable earnings of $1.28 per share comfortably surpassed the Zacks Consensus Estimate of 93 cents for the July-September quarter. The figure reflects a significant rise from 63 cents recorded in the prior-year quarter.
SEI Investments Co.’s (SEIC - Free Report) earnings of 97 cents per share came in line with the Zacks Consensus Estimate for the September-end quarter. The bottom line reflected 29% growth from the prior-year quarter.
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Lazard Ltd (LAZ - Free Report) reported third-quarter 2021 adjusted earnings of 98 cents per share, beating the Zacks Consensus Estimate of 94 cents. The reported figure also reflects 46% year-over-year growth.
Higher revenues and growth in assets under management (AUM) favored the company. However, operating expenses witnessed a rise. Most likely due to this, shares of the company gained 6.6%, following the earnings release.
Adjusted net income in the reported quarter was $111.4 million, up 46% year over year. On a GAAP basis, Lazard’s net income came in at $107.2 million or 94 cents per share compared with the $75 million or 66 cents recorded in the prior-year quarter.
Revenues Rise, Expenses Flare Up
During the third quarter, adjusted operating revenues totaled a record $701.64 million, up 23% year over year. This upside resulted from an increase in asset management and financial advisory revenues. The reported figure also outpaced the Zacks Consensus Estimate of $830.83 million.
Adjusted operating expenses came in at $534.2 million in the quarter, up 20% year over year. Higher compensation and benefits as well as non-compensation expense resulted in this upsurge.
Adjusted compensation and benefits expenses rose 22% on a year-over-year basis to $417.5 million. Adjusted non-compensation expenses for the quarter were $116.7 million, up 13% year over year.
The ratio of compensation expenses to operating revenues was 59.5%, down from the year-earlier quarter’s 60%. The ratio of non-compensation expenses to operating revenues was 16.6% compared with the year-ago quarter’s 18.1%.
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 adjusted revenues were $381.3 million, up 24% from the year-earlier quarter.
Asset Management: The segment’s adjusted revenues were $310.6 million, up 19% from the prior-year quarter.
Corporate: The segment generated $9.8 million adjusted revenues, up substantially from the prior-year quarter.
Growing AUM
As of Sep 30, 2021, AUM was recorded at $272.6 billion, up 5.4% from the prior-year quarter. The quarter witnessed a market depreciation and foreign-exchange depreciation of $2.5 billion and net outflows of $2.3 billion.
Average AUM came in at $277.9 billion, up 23% year over year.
Deteriorating Balance Sheet
Lazard’s cash and cash equivalents totaled $1.18 billion as of Sep 30, 2021, compared with $1.39 billion as of Dec 31, 2020. The company’s stockholders’ equity was $977.7 million compared with $999.4 million as of Dec 31, 2020.
Steady Capital-Deployment Activity
In the third quarter, Lazard repurchased 1.1 million shares at an average cost of $46.01 per share and paid out dividends of $49 million. As of the third-quarter end, the company had $314 million remaining in its share-repurchase authorization.
Our Viewpoint
Results reflect Lazard’s impressive performance during the September-end quarter. Although diverse footprint, steady capital-deployment activities and revenue growth position the company favorably for the long haul; macro headwinds, elevated expenses and overall outflows are straining its financials.
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, Inc.’s (BLK - Free Report) third-quarter 2021 adjusted earnings of $10.95 per share outpaced the Zacks Consensus Estimate of $9.63. The figure reflects a rise of 18.8% from the year-ago quarter’s number.
Blackstone’s (BX - Free Report) distributable earnings of $1.28 per share comfortably surpassed the Zacks Consensus Estimate of 93 cents for the July-September quarter. The figure reflects a significant rise from 63 cents recorded in the prior-year quarter.
SEI Investments Co.’s (SEIC - Free Report) earnings of 97 cents per share came in line with the Zacks Consensus Estimate for the September-end quarter. The bottom line reflected 29% growth from the prior-year quarter.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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