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Why Is Lazard Ltd (LAZ) Up 14.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Lazard Ltd (LAZ - Free Report) . Shares have added about 14.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lazard Ltd due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Lazard Q2 Earnings Beat Estimates on Lower Expenses, AUM Falls
Lazard reported second-quarter 2020 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 negatively impacted the results. Also, a fall in AUM was a headwind.
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.
Balance Sheet Position
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.
Outlook
In Financial Advisory, the company continues to expect a subdued third quarter based on the pause and M&A activity during the first half of 2020, with more normalized levels of activity expected in the fourth quarter and into 2021.
Management expects an annual effective tax rate for this year in the low-to-mid 20% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 28.13% due to these changes.
VGM Scores
Currently, Lazard Ltd has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Lazard Ltd has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Lazard Ltd (LAZ) Up 14.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Lazard Ltd (LAZ - Free Report) . Shares have added about 14.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lazard Ltd due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Lazard Q2 Earnings Beat Estimates on Lower Expenses, AUM Falls
Lazard reported second-quarter 2020 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 negatively impacted the results. Also, a fall in AUM was a headwind.
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.
Balance Sheet Position
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.
Outlook
In Financial Advisory, the company continues to expect a subdued third quarter based on the pause and M&A activity during the first half of 2020, with more normalized levels of activity expected in the fourth quarter and into 2021.
Management expects an annual effective tax rate for this year in the low-to-mid 20% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 28.13% due to these changes.
VGM Scores
Currently, Lazard Ltd has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Lazard Ltd has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.