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Lazard (LAZ) Shares Decline on Q1 Loss & Lower Revenues
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Lazard Ltd. (LAZ - Free Report) lost 3.11% as it reported a first-quarter 2023 adjusted net loss of 26 cents per share.The Zacks Consensus Estimate was pegged at earnings of 30 cents. The bottom line also compared unfavorably with the prior-year quarter’s earnings of $1.05.
Results were hurt by a decline in revenues and higher expenses. A decrease in the assets under management (AUM) balance was another headwind.
On a GAAP basis, Lazard’s net loss was $22 million, against net income of $114 million in the prior-year quarter.
Revenues Decline & Expenses Rise
Quarterly adjusted operating revenues totaled $527 million, down 25% year over year. The top line missed the Zacks Consensus Estimate of $527.3 million.
Operating expenses were $579.3 million, up 8% year over year. The rise was mainly due to an increase in compensation and benefits costs, occupancy and equipment costs and professional services costs.
The ratio of adjusted compensation expenses to operating revenues was 75.7%, up from the year-earlier quarter’s 58.5%. The ratio of non-compensation expenses to operating revenues was 27%, up from the year-ago quarter’s 16.8%.
Quarterly Segmental Performance Weak
Financial Advisory: The segment’s operating revenues were $274 million, down 29% from the year-earlier quarter.
Asset Management: The segment’s operating revenues were $265 million, down 15% from the prior-year quarter.
Corporate: The segment’s adjusted operating revenues were a loss of $11 million.
AUM Declines
As of Mar 31, 2023, total AUM was $232 billion, down 8% from the prior-year quarter. The quarter witnessed a market and foreign-exchange appreciation of $13.01 billion and net inflows of $2.99 billion.
The average AUM in the reported quarter was $227 billion, down 12% year over year.
Balance Sheet Position Weak
Lazard’s cash and cash equivalents totaled $597 million as of Mar 31, 2023 compared with $1.23 billion as of Dec 31, 2022. Stockholders’ equity was $508.4 million compared with $675.4 million as of Dec 31, 2022.
Capital Deployment Update
In first-quarter 2023, Lazard repurchased 2.7 million shares.
As of Mar 31, 2023, the company’s remaining share repurchase authorization was $203 million.
Our Viewpoint
Lazard has a diversified business model, which aligns comfortably with the current economic environment. Also, the capital deployment activities seem sustainable. However, the fall in AUM was an undermining factor.
As part of cost-saving initiatives, LAZ anticipates reducing its workforce by 10% in 2023. It expects a charge of approximately $95 million in the ongoing year. This will inflate expenses in the upcoming quarters.
BlackRock, Inc.’s (BLK - Free Report) first-quarter 2023 adjusted earnings of $7.93 per share surpassed the Zacks Consensus Estimate of $7.71. However, the figure reflects a decrease of 16.7% from the year-ago quarter. Our estimate for adjusted earnings was $7.37.
BLK's results benefited from a decline in expenses. However, lower revenues and AUM balance were major headwinds.
SEI Investments Co.’s (SEIC - Free Report) first-quarter 2023 earnings of 79 cents per share missed the Zacks Consensus Estimate of 82 cents. The bottom line reflects a decline of 41.9% from the prior-year quarter. Our estimate for earnings was 78 cents.
SEIC's results were adversely impacted by lower revenues. Also, marginally higher expenses created a headwind. Nevertheless, an increase in the AUM balance positively impacted the results in the quarter.
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Lazard (LAZ) Shares Decline on Q1 Loss & Lower Revenues
Lazard Ltd. (LAZ - Free Report) lost 3.11% as it reported a first-quarter 2023 adjusted net loss of 26 cents per share.The Zacks Consensus Estimate was pegged at earnings of 30 cents. The bottom line also compared unfavorably with the prior-year quarter’s earnings of $1.05.
Results were hurt by a decline in revenues and higher expenses. A decrease in the assets under management (AUM) balance was another headwind.
On a GAAP basis, Lazard’s net loss was $22 million, against net income of $114 million in the prior-year quarter.
Revenues Decline & Expenses Rise
Quarterly adjusted operating revenues totaled $527 million, down 25% year over year. The top line missed the Zacks Consensus Estimate of $527.3 million.
Operating expenses were $579.3 million, up 8% year over year. The rise was mainly due to an increase in compensation and benefits costs, occupancy and equipment costs and professional services costs.
The ratio of adjusted compensation expenses to operating revenues was 75.7%, up from the year-earlier quarter’s 58.5%. The ratio of non-compensation expenses to operating revenues was 27%, up from the year-ago quarter’s 16.8%.
Quarterly Segmental Performance Weak
Financial Advisory: The segment’s operating revenues were $274 million, down 29% from the year-earlier quarter.
Asset Management: The segment’s operating revenues were $265 million, down 15% from the prior-year quarter.
Corporate: The segment’s adjusted operating revenues were a loss of $11 million.
AUM Declines
As of Mar 31, 2023, total AUM was $232 billion, down 8% from the prior-year quarter. The quarter witnessed a market and foreign-exchange appreciation of $13.01 billion and net inflows of $2.99 billion.
The average AUM in the reported quarter was $227 billion, down 12% year over year.
Balance Sheet Position Weak
Lazard’s cash and cash equivalents totaled $597 million as of Mar 31, 2023 compared with $1.23 billion as of Dec 31, 2022. Stockholders’ equity was $508.4 million compared with $675.4 million as of Dec 31, 2022.
Capital Deployment Update
In first-quarter 2023, Lazard repurchased 2.7 million shares.
As of Mar 31, 2023, the company’s remaining share repurchase authorization was $203 million.
Our Viewpoint
Lazard has a diversified business model, which aligns comfortably with the current economic environment. Also, the capital deployment activities seem sustainable. However, the fall in AUM was an undermining factor.
As part of cost-saving initiatives, LAZ anticipates reducing its workforce by 10% in 2023. It expects a charge of approximately $95 million in the ongoing year. This will inflate expenses in the upcoming quarters.
Lazard Ltd Price, Consensus and EPS Surprise
Lazard Ltd price-consensus-eps-surprise-chart | Lazard Ltd Quote
Currently, Lazard carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Asset Managers
BlackRock, Inc.’s (BLK - Free Report) first-quarter 2023 adjusted earnings of $7.93 per share surpassed the Zacks Consensus Estimate of $7.71. However, the figure reflects a decrease of 16.7% from the year-ago quarter. Our estimate for adjusted earnings was $7.37.
BLK's results benefited from a decline in expenses. However, lower revenues and AUM balance were major headwinds.
SEI Investments Co.’s (SEIC - Free Report) first-quarter 2023 earnings of 79 cents per share missed the Zacks Consensus Estimate of 82 cents. The bottom line reflects a decline of 41.9% from the prior-year quarter. Our estimate for earnings was 78 cents.
SEIC's results were adversely impacted by lower revenues. Also, marginally higher expenses created a headwind. Nevertheless, an increase in the AUM balance positively impacted the results in the quarter.