The third-quarter earnings cycle for most of the Finance sector companies has ended and the results released so far depict a strong improvement in the overall sector’s performance.
Lazard Ltd. (LAZ - Free Report) is one such Finance industry participant which came out with better-than-expected results. This Bermuda-based financial advisory and asset management firm experienced growth in both revenues and assets under management (AUM) during the third-quarter 2016.
Notably, shares of Lazard gained more than 14% on the NYSE during the last six months. The company continues to reflect strength in several areas, despite the challenging operating environment.
Why the Price Rally May Continue
Organic Growth Strength: Revenues have been improving at Lazard, driven by a strong team of indigenous professionals in the Financial Advisory segment and diversified assets under management (AUM) mix in the Asset Management segment. The company recorded 3% year-over-year increase during third-quarter 2016, along with a rise of 6.8% CAGR over the last five years (2011–2015).
Recently, in Sep 2016, Lazard acquired Canada-based independent boutique – Verus Partners – to expand financial advisory in North America. Further, in Oct 2016, the company acquired its remaining 50% stake in MBA Lazard to strengthen operations in Latin America as well as global markets.
Uptrend in AUM: Lazard’s investment strategies in both equities and fixed income segment across global, local and emerging markets have resulted in improving its AUM. The company witnessed a 12% rise in AUM during the first nine months of 2016. Also, AUM increased at a CAGR of 11.8% over the last four years (2011–2014). With anticipated improvement in the market, this uptrend in AUM is likely to persist over the coming quarters.
Expense Management: The company remains focused on controlling costs. During the nine-month period ended Sep 30, 2016, operating expenses plunged by 33% on a year-over-year basis. Notably, in 2012, Lazard had announced cost-reduction initiatives for which the full impact of the savings was reflected in 2014. Further, during 2014 and 2015, the company had reported GAAP-adjusted operating margin of 25.5% and 26.4%, respectively, compared to a target of 25%. These achievements, meant for improving profitability with least impact on revenues, will likely bolster the company’s long-term top-line growth prospects.
Impressive capital deployment: Lazard remains committed toward enhancing its shareholders’ wealth. In Apr 2016, the company hiked its quarterly cash dividend by 9% and in Feb 2016, it declared a 20% increase in its special dividend. Further, recently the board of directors’ approved an additional share repurchase of $236 million, bringing the total amount to $400 million.
Upward Estimate Revision: The Zacks Consensus Estimate for the stock over the last 30 days moved upward by 9.7% to $1.02 per share for the current quarter and by 4.2% to $2.94 per share for the current year. This highlights analysts’ confidence over the stock. Moreover, Lazard has a Value Style Score of B and holds a Zacks Rank #2 (Buy). Our research shows that stocks with Style Scores of A or B when combined with Zacks Rank #1 (Strong Buy) or #2 offer the best upside potential.
Other Stocks that Warrant a Look
Woori Bank Co., Ltd. (WF - Free Report) sports a Zacks Rank #1. The Zacks Consensus Estimate for the stock moved upward 52.2% to $5.04 per share over the last 30 days for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Virtus Investment Partners, Inc. (VRTS - Free Report) also sports a Zacks Rank #1. The Zacks Consensus Estimate for the stock inched up 9.3% to $5.75 per share over the last 30 days for the current year.
Apollo Global Management, LLC (APO - Free Report) holds a Zacks rank #2. The Zacks Consensus Estimate for the stock improved 3.5% to $1.76 per share over the last 30 days for the current year.
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