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Lazard (LAZ) Stock Rises 5.7% on Q2 Earnings Beat, AUM Falls

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Lazard Ltd’s (LAZ - Free Report) shares gained 5.7% following the release of its second-quarter 2022 results.  Adjusted net income per share of 92 cents surpassed the Zacks Consensus Estimate of 87 cents. The reported figure reflects a 28% decline year over year.

Lower expenses and a hike in quarterly dividends are impressive factors of the company. However, a decline in assets management revenues affected operating revenues.

Adjusted net income in the reported quarter was $96 million, down 34% year over year. On a GAAP basis, Lazard’s net income came in at $95 million, down from $123 million recorded in the prior-year quarter.

Revenues & Expenses Decline

In the second quarter, adjusted operating revenues totaled $675.91 million, down 18% year over year. This downside resulted from a decrease in asset management revenues. Nonetheless, the reported figure beat the Zacks Consensus Estimate of $674 million.

Operating expenses were $513.7 million in the quarter, down 22% year over year. The decline was mainly due to a fall in all components of operating expenses except marketing and business development.

Adjusted compensation and benefits expenses were down 19% on a year-over-year basis to $395 million.  Non-compensation expenses in the quarter were $130.9 million, up 10%.

The ratio of adjusted compensation expenses to operating revenues was 58.5%, down from the year-earlier quarter’s 59.5%. The ratio of non-compensation expenses to operating revenues was 19.4%, up from the year-ago quarter’s 14.5%.

Segment Performance

Financial Advisory: The segment’s adjusted operating revenues were $406.8 million, down 14% from the year-earlier quarter.

Asset Management: The segment’s adjusted operating revenues were $265.7 million, down 23% from the prior-year quarter.

Corporate: The segment’s adjusted operating revenues were $3.4 million, down 51% from the prior-year quarter.

Asset Under Management (AUM) Declines

As of Jun 30, 2022, total AUM was recorded at $216.63 billion, down 21%  from the prior-year quarter. The quarter witnessed a market and foreign-exchange depreciation of $31.4 billion and net outflows of $4.65 billion.

Average AUM came in at $230.16 billion, down 16.6% year over year.

Balance Sheet Position Weak

Lazard’s cash and cash equivalents totaled $907.5 million as of Jun 30, 2022, compared with $1.47 billion as of Dec 31, 2021. The company’s stockholders’ equity was $826.9 million compared with $1.07 billion as of Dec 31, 2021.

Steady Capital-Deployment Activity

In the second quarter of 2022, Lazard repurchased $199 million worth of shares and paid $46 million in dividends. On Jul 27, 2022, the boards of directors authorized additional shares of up to $500 million, which will expire on Dec 31, 2024. Thus, the total outstanding share repurchase authorization was $559 million.  
On Jul 27, 2022, Lazard announced a hike in quarterly dividend by 6% to 50 cents. The dividend will be paid out on Aug 19 to its stockholders on record as of Aug 8, 2022.

Our Viewpoint

Lazard’s has a diversified business model, and it aligned comfortably with the current economic environment. Also, the capital deployment activities seem sustainable. However, the fall in AUM was an undermining factor.

Lazard Ltd Price, Consensus and EPS Surprise

Lazard Ltd Price, Consensus and EPS Surprise

Lazard Ltd price-consensus-eps-surprise-chart | 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.

Performance of Other Asset Managers

Franklin Resources Inc. (BEN - Free Report) has reported third-quarter fiscal 2022 (ended Jun 30) adjusted earnings of 82 cents per share, which beat the Zacks Consensus Estimate of 73 cents. However, the bottom line declined 15% from the prior-year quarter.

While lower expenses alleviated the bottom-line pressure to some extent, BEN’s results display top-line weakness in the quarter, underlining substantial drawdowns in both equities and fixed-income markets. A decline in AUM was another major drag.

T. Rowe Price Group, Inc. (TROW - Free Report) reported second-quarter 2022 adjusted earnings per share of 1.79, which missed the Zacks Consensus Estimate of $2.24. The reported figure also declined 45.9% year over year.

TROW's net revenues were affected by the decline in AUM and the loss of capital allocation income. Nonetheless, appreciation in cash and cash equivalent will help the company to continue investing.


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