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Lazard Reflects Organic Growth: Should You Hold the Stock?

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On Jun 27, we issued an updated research report on Lazard Ltd. (LAZ - Free Report) . The company remains well positioned to grow organically, driven by strength in its Financial Advisory and Asset Management segments. Further, its cost management initiatives keep us optimistic about its growth prospects.

Nevertheless, Lazard’s dependence on local and global economic conditions for revenue generation, and regulatory pressure can hurt top-line growth in the near term.

Over the last 30 days, the company’s Zacks Consensus Estimate for earnings has been revised around 2.8% upward for the current year, reflecting investors’ optimism.

Shares of this Zacks Rank #3 (Hold) stock have gained 5% over the past year compared with 5.3% growth recorded by the industry.


Notably, organic growth remains a key strength at Lazard, as reflected by its revenue growth trend. Operating revenues recorded a CAGR of 4.3% over the four-year period (2014-2017), with some annual volatility. The increasing trend continued into first-quarter 2018. Based on the strong team of indigenous professionals in the Financial Advisory segment and diversified AUM mix in the Asset Management segment, we believe that these segments are poised to drive the company’s overall revenue growth.

Further, Lazard is diligently working on its cost-containment measures. In 2012, the company announced cost-reduction initiatives, for which the full impact of savings was reflected in 2014. During 2014, 2015, 2016 and 2017, the company reported GAAP-adjusted operating margins of 25.5%, 26.4%, 25% and 26.8%, respectively, versus the targeted 25%. Such achievements — directed toward improving profitability, with minimal impact on revenues — will likely boost the company’s long-term growth opportunities.

However, the investment manager’s heavy reliance on overseas revenues, which account for nearly 43% of total operating revenues, remains a concern. A plethora of risks — stemming from the regulatory and political environment, foreign exchange fluctuations, and performance of regional economy — can adversely affect the top line.

Stocks to Consider

The Zacks Consensus Estimate for current-year earnings of America First Multifamily Investors, L.P. (ATAX - Free Report) has been revised 18.2% upward in the last 60 days. Also, its share price has risen 3.6% over the past three months. Presently, it carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Virtus Investment Partners, Inc. (VRTS - Free Report) currently has a Zacks Rank of 2. Its earnings estimates for 2018 have been revised 3% upward over the last 60 days. Further, in the past three months, the company’s shares have gained 3.5%.

The Zacks Consensus Estimate for Woori Bank (WF - Free Report) current-year earnings has been revised upward 7.3% in the last 30 days. Also, its share price has appreciated 3.6% in three months’ time. It currently carries a Zacks Rank of 2.

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