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Lazard (LAZ) Stock Gains 5.9% on Q2 Earnings Beat, Costs Down
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Following the second-quarter 2020 results, shares of Lazard (LAZ - Free Report) have gained 5.85%. The company reported adjusted earnings of 67 cents per share, beating the Zacks Consensus Estimate of 36 cents. Nevertheless, the figure reflects a decline of 8% from the prior-year quarter.
Results were supported by a fall in expenses. Also, the liquidity position remained strong. However, lower revenues and a fall in assets under management (AUM) negatively impacted the results.
Adjusted net income in the reported quarter was $75 million, declining 12% year over year. On a GAAP basis, Lazard’s net income was $73 million or 66 cents per share compared with $66 million or 55 cents recorded in the prior-year quarter.
Revenues Down, Costs Decline
In the second quarter, adjusted operating revenues were $542.9 million, down 14% year over year. The decline resulted from a fall in asset-management, and corporate and financial advisory revenues. However, the top line surpassed the Zacks Consensus Estimate of $502.9 million.
Adjusted operating expenses were $425.3 million in the quarter, down 13.2% year over year. Lower compensation and benefits as well as non-compensation expenses resulted in the decline.
Adjusted compensation and benefits expenses slipped 10% on a year-over-year basis to $325.7 million. Adjusted non-compensation expenses for the quarter were $99.6 million, down 22% year over year.
The ratio of compensation expenses to operating revenues was 60%, up from the year-earlier quarter’s 57.5%. The ratio of non-compensation expenses to operating revenues was 18.3% compared with the year-ago quarter’s 20.3%.
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.
Segmental Performance
Financial Advisory: The segment’s total revenues came in at a record $292.9 million, down 11% from the year-earlier quarter.
Asset Management: The segment’s total revenues were $245.3 million, down 16% from the prior-year quarter. Reduction in management and other fees resulted in the downside, partly offset by higher incentive fees.
Corporate: The segment generated revenues of $4.7 million compared with $9.6 million recorded in the year-ago period.
AUM Lower
As of Jun 30, 2020, AUM was recorded at $214.7 billion, down 10% from the prior-year quarter. The quarter witnessed a market and foreign-exchange appreciation of $27.6 billion and net outflows of $6 billion.
Average AUM was $208.5 billion, down 12% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents totaled $896.8 million as of Jun 30, 2020, compared with $1.2 billion recorded as of Dec 31, 2019. The company’s stockholders’ equity was $684 million compared with $681.6 million as of Dec 31, 2019.
Steady Capital-Deployment Activity
During the April-June period, the company returned $49 million to shareholders in dividends. No share repurchase was made during the quarter.
Our Viewpoint
Results reflect Lazard’s decent performance during the June-end quarter. Though diverse footprint, steady capital-deployment activities and controlled expenses position the company favorably for the long haul; macro headwinds, revenue declines and overall outflows strained financials.
LPL Financial’s (LPLA - Free Report) second-quarter 2020 adjusted earnings of $1.42 per share surpassed the Zacks Consensus Estimate of $1.31. The figure reflected a decline of 23% from the prior-year quarter.
Raymond James’ (RJF - Free Report) third-quarter fiscal 2020 (ended Jun 30) earnings of $1.23 per share comfortably surpassed the Zacks Consensus Estimate of 92 cents. However, on a year-over-year basis, the bottom line decreased 32%.
Moelis & Company (MC - Free Report) recorded second-quarter 2020 adjusted loss per share of 11 cents, narrower than the Zacks Consensus Estimate of 14 cents. It reported earnings per share of 56 cents in the prior-year quarter.
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Lazard (LAZ) Stock Gains 5.9% on Q2 Earnings Beat, Costs Down
Following the second-quarter 2020 results, shares of Lazard (LAZ - Free Report) have gained 5.85%. The company reported adjusted earnings of 67 cents per share, beating the Zacks Consensus Estimate of 36 cents. Nevertheless, the figure reflects a decline of 8% from the prior-year quarter.
Results were supported by a fall in expenses. Also, the liquidity position remained strong. However, lower revenues and a fall in assets under management (AUM) negatively impacted the results.
Adjusted net income in the reported quarter was $75 million, declining 12% year over year. On a GAAP basis, Lazard’s net income was $73 million or 66 cents per share compared with $66 million or 55 cents recorded in the prior-year quarter.
Revenues Down, Costs Decline
In the second quarter, adjusted operating revenues were $542.9 million, down 14% year over year. The decline resulted from a fall in asset-management, and corporate and financial advisory revenues. However, the top line surpassed the Zacks Consensus Estimate of $502.9 million.
Adjusted operating expenses were $425.3 million in the quarter, down 13.2% year over year. Lower compensation and benefits as well as non-compensation expenses resulted in the decline.
Adjusted compensation and benefits expenses slipped 10% on a year-over-year basis to $325.7 million. Adjusted non-compensation expenses for the quarter were $99.6 million, down 22% year over year.
The ratio of compensation expenses to operating revenues was 60%, up from the year-earlier quarter’s 57.5%. The ratio of non-compensation expenses to operating revenues was 18.3% compared with the year-ago quarter’s 20.3%.
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.
Segmental Performance
Financial Advisory: The segment’s total revenues came in at a record $292.9 million, down 11% from the year-earlier quarter.
Asset Management: The segment’s total revenues were $245.3 million, down 16% from the prior-year quarter. Reduction in management and other fees resulted in the downside, partly offset by higher incentive fees.
Corporate: The segment generated revenues of $4.7 million compared with $9.6 million recorded in the year-ago period.
AUM Lower
As of Jun 30, 2020, AUM was recorded at $214.7 billion, down 10% from the prior-year quarter. The quarter witnessed a market and foreign-exchange appreciation of $27.6 billion and net outflows of $6 billion.
Average AUM was $208.5 billion, down 12% year over year.
Stable Balance Sheet
Lazard’s cash and cash equivalents totaled $896.8 million as of Jun 30, 2020, compared with $1.2 billion recorded as of Dec 31, 2019. The company’s stockholders’ equity was $684 million compared with $681.6 million as of Dec 31, 2019.
Steady Capital-Deployment Activity
During the April-June period, the company returned $49 million to shareholders in dividends. No share repurchase was made during the quarter.
Our Viewpoint
Results reflect Lazard’s decent performance during the June-end quarter. Though diverse footprint, steady capital-deployment activities and controlled expenses position the company favorably for the long haul; macro headwinds, revenue declines and overall outflows strained financials.
Lazard Ltd Price, Consensus and EPS Surprise
Lazard Ltd price-consensus-eps-surprise-chart | 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
LPL Financial’s (LPLA - Free Report) second-quarter 2020 adjusted earnings of $1.42 per share surpassed the Zacks Consensus Estimate of $1.31. The figure reflected a decline of 23% from the prior-year quarter.
Raymond James’ (RJF - Free Report) third-quarter fiscal 2020 (ended Jun 30) earnings of $1.23 per share comfortably surpassed the Zacks Consensus Estimate of 92 cents. However, on a year-over-year basis, the bottom line decreased 32%.
Moelis & Company (MC - Free Report) recorded second-quarter 2020 adjusted loss per share of 11 cents, narrower than the Zacks Consensus Estimate of 14 cents. It reported earnings per share of 56 cents in the prior-year quarter.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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