We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Houlihan Lokey (HLI) Post Q1 Earnings Beat: A Buy or A Bye?
Read MoreHide Full Article
Since Houlihan Lokey, Inc. (HLI - Free Report) reported its first-quarter fiscal 2025 results on Jul 30, 2024, after the closing bell, its shares had lost 3.1% through Aug 7. However, thanks to a 3.4% jump yesterday, the stock is now back at $149.08, which is only 2.6% lower than its 52-week high of $153.08.
Over the year-to-date period, HLI shares have gained 24.4%, outperforming the S&P 500 Index’s growth of 9.3% and the industry’s decline of 3.7%. Given its strong performance, should you consider buying this outperformer now, or is it time to be cautious? Before answering this, let’s delve into the details of HLI’s fiscal first-quarter 2025 results and what they mean for the company's future.
Image Source: Zacks Investment Research
Q1 Highlights
The quarterly results gained fromimproving merger and acquisition activities, which are expected to continue for the rest of the fiscal year. Also, the company expects to witness improvements in capital markets activity.Higher expenses partially offset the positives.
HLI reported first-quarter fiscal 2025 adjusted earnings per share (EPS) of $1.22, which met the Zacks Consensus Estimate. The bottom line advanced 37.1% year over year.
Total revenues improved 23.5% year over year to $513.6 million in the quarter under review. The top line beat the Zacks Consensus Estimate by almost 1%.
Q1 Performance Details
Corporate Finance recorded its strongest fiscal first quarter ever, while Financial Restructuring recorded the second strongest fiscal first quarter. Moreover, its Financial and Valuation Advisory business benefited from market recovery.
Revenues from U.S. operations jumped 11.9% year over year, while international revenues surged 66.9%.
Total operating expenses increased 22.1% year over year to $418 million due to higher employee compensation and benefits, travel, meals, and entertainment, rent and information technology and communications.
The adjusted employee compensation and benefits expense ratio remained stable at 61.5%, while the adjusted non-compensation expense ratio decreased 260 bps to 15.6%.
Net income of $88.9 million increased from $61.4 million a year ago.
Segmental Update
Corporate Finance: Revenues advanced 44.6% year over year in the fiscal first quarter to $328.4 million. The segment benefited from improved average transaction fees on closed transactions, a higher number of closed transactions and favorable market conditions. Managing Directors rose 1.3%, while closed transactions increased 22.1% year over year in the quarter.
Financial Restructuring: The unit’s revenues decreased 5% year over year in the quarter under review to $117 million. The segment was affected by lower average transaction fees on closed transactions and reduced retainer fees, partially offset by the growing number of closed transactions. Managing Directors declined 1.7%, while closed transactions grew 10% in the fiscal first quarter.
Financial and Valuation Advisory: The segment’s revenues improved 4% year over year in the quarter under review to $67.8 million due to a rise in the number of fee events. Managing Directors remained stable during the quarter, while fee events rose 7.8% year over year.
Financial Update (as of Jun 30, 2024)
Houlihan Lokey exited the fiscal first quarter with cash and cash equivalents of $449.7 million, which rose from $721.2 million in fiscal 2024-end. Total assets of $2.9 billion decreased from $3.2 billion at fiscal 2024-end.
Operating lease liabilities of $435.2 million increased from $415.4 million at the end of fiscal 2024.
Total shareholders’ equity of $1.83 billion marginally fell from $1.84 billion at fiscal 2024-end.
Dividend Update
HLI announced a quarterly cash dividend of 57 cents per share. The dividend will be paid out on Sep 15, 2024, to shareholders of record as of Sep 3.
Recent Developments
HLI recently agreed to acquire an independent advisory firm, Waller Helms Advisors. The deal is likely to close before 2024-end. The acquiree offers investment banking services to clients from insurance as well as wealth management markets. The Chicago-based firm’s workers are expected to join Houlihan Lokey, which will complement its Financial Services platform.
Valuation
From a valuation perspective, Houlihan Lokey appears relatively expensive, which may constrain short-term gains and make it less appealing compared to other investment opportunities. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 24.54X, significantly higher than the industry average of 12.68X.
Image Source: Zacks Investment Research
What Should Investors Do?
Given the expected improvements in capital markets activity and merger and acquisition activities, HLI’s performance will continue to improve in the coming days, boosting profits. The Zacks Consensus Estimate for current-year and next-year bottom lines suggest a 25.6% and 21.3% year-over-year growth, respectively.
The current market conditions and the company’s focus on improving its capabilities through acquisitions to address the growing demand for its services make this Zacks Rank #3 (Hold) company a worthy keep for existing shareholders. However, new investors may want to wait for a better entry point, given the stock’s high valuation, growing expenses, proximity to its 52-week high and growing competition in the market.
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $17.33 per share, which indicates 35% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 116.7% surge from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 64.9% year-over-year growth. During the past month, WT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 34.6% year-over-year improvement. During the past month, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $127.2 million, indicating an 11.1% increase from a year ago.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Houlihan Lokey (HLI) Post Q1 Earnings Beat: A Buy or A Bye?
Since Houlihan Lokey, Inc. (HLI - Free Report) reported its first-quarter fiscal 2025 results on Jul 30, 2024, after the closing bell, its shares had lost 3.1% through Aug 7. However, thanks to a 3.4% jump yesterday, the stock is now back at $149.08, which is only 2.6% lower than its 52-week high of $153.08.
Over the year-to-date period, HLI shares have gained 24.4%, outperforming the S&P 500 Index’s growth of 9.3% and the industry’s decline of 3.7%. Given its strong performance, should you consider buying this outperformer now, or is it time to be cautious? Before answering this, let’s delve into the details of HLI’s fiscal first-quarter 2025 results and what they mean for the company's future.
Q1 Highlights
The quarterly results gained fromimproving merger and acquisition activities, which are expected to continue for the rest of the fiscal year. Also, the company expects to witness improvements in capital markets activity.Higher expenses partially offset the positives.
HLI reported first-quarter fiscal 2025 adjusted earnings per share (EPS) of $1.22, which met the Zacks Consensus Estimate. The bottom line advanced 37.1% year over year.
Total revenues improved 23.5% year over year to $513.6 million in the quarter under review. The top line beat the Zacks Consensus Estimate by almost 1%.
Q1 Performance Details
Corporate Finance recorded its strongest fiscal first quarter ever, while Financial Restructuring recorded the second strongest fiscal first quarter. Moreover, its Financial and Valuation Advisory business benefited from market recovery.
Revenues from U.S. operations jumped 11.9% year over year, while international revenues surged 66.9%.
Total operating expenses increased 22.1% year over year to $418 million due to higher employee compensation and benefits, travel, meals, and entertainment, rent and information technology and communications.
The adjusted employee compensation and benefits expense ratio remained stable at 61.5%, while the adjusted non-compensation expense ratio decreased 260 bps to 15.6%.
Net income of $88.9 million increased from $61.4 million a year ago.
Segmental Update
Corporate Finance: Revenues advanced 44.6% year over year in the fiscal first quarter to $328.4 million. The segment benefited from improved average transaction fees on closed transactions, a higher number of closed transactions and favorable market conditions. Managing Directors rose 1.3%, while closed transactions increased 22.1% year over year in the quarter.
Financial Restructuring: The unit’s revenues decreased 5% year over year in the quarter under review to $117 million. The segment was affected by lower average transaction fees on closed transactions and reduced retainer fees, partially offset by the growing number of closed transactions. Managing Directors declined 1.7%, while closed transactions grew 10% in the fiscal first quarter.
Financial and Valuation Advisory: The segment’s revenues improved 4% year over year in the quarter under review to $67.8 million due to a rise in the number of fee events. Managing Directors remained stable during the quarter, while fee events rose 7.8% year over year.
Financial Update (as of Jun 30, 2024)
Houlihan Lokey exited the fiscal first quarter with cash and cash equivalents of $449.7 million, which rose from $721.2 million in fiscal 2024-end. Total assets of $2.9 billion decreased from $3.2 billion at fiscal 2024-end.
Operating lease liabilities of $435.2 million increased from $415.4 million at the end of fiscal 2024.
Total shareholders’ equity of $1.83 billion marginally fell from $1.84 billion at fiscal 2024-end.
Dividend Update
HLI announced a quarterly cash dividend of 57 cents per share. The dividend will be paid out on Sep 15, 2024, to shareholders of record as of Sep 3.
Recent Developments
HLI recently agreed to acquire an independent advisory firm, Waller Helms Advisors. The deal is likely to close before 2024-end. The acquiree offers investment banking services to clients from insurance as well as wealth management markets. The Chicago-based firm’s workers are expected to join Houlihan Lokey, which will complement its Financial Services platform.
Valuation
From a valuation perspective, Houlihan Lokey appears relatively expensive, which may constrain short-term gains and make it less appealing compared to other investment opportunities. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 24.54X, significantly higher than the industry average of 12.68X.
Image Source: Zacks Investment Research
What Should Investors Do?
Given the expected improvements in capital markets activity and merger and acquisition activities, HLI’s performance will continue to improve in the coming days, boosting profits. The Zacks Consensus Estimate for current-year and next-year bottom lines suggest a 25.6% and 21.3% year-over-year growth, respectively.
The current market conditions and the company’s focus on improving its capabilities through acquisitions to address the growing demand for its services make this Zacks Rank #3 (Hold) company a worthy keep for existing shareholders. However, new investors may want to wait for a better entry point, given the stock’s high valuation, growing expenses, proximity to its 52-week high and growing competition in the market.
Key Picks
Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. (JXN - Free Report) , WisdomTree, Inc. (WT - Free Report) and HIVE Digital Technologies Ltd. (HIVE - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $17.33 per share, which indicates 35% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 116.7% surge from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 64.9% year-over-year growth. During the past month, WT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 34.6% year-over-year improvement. During the past month, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $127.2 million, indicating an 11.1% increase from a year ago.