Benefits from a stabilizing economy and gradually improving interest-rate scenario have positioned the investment management industry well. Investment managers are expected to benefit further from a rising rate environment.
Additionally, most investment managers have waived off the majority of their fees with the rates rising since 2016. This decline in fee waivers has aided the company’s top-line growth. Moreover, the asset managers witnessed revenue growth in the recently-concluded quarter on the back of increase in assets under management (AUM).
Performance of equity markets remained favorable as reflected by nearly 3% growth of the S&P 500 Index. This has resulted in higher AUM.
Therefore, we are focusing on two investment managers, AllianceBernstein Holding L.P. (AB - Free Report) and Lazard Ltd (LAZ - Free Report) .
AllianceBernstein, with a market cap of $2.9 billion, is a publicly-owned investment manager providing research services to its clients and invests in public equity, fixed income, and alternative investment markets globally. On the other hand, Lazard operates as a financial advisory and asset management firm, globally, and has a market cap of $6.8 billion.
Both Lazard and AllianceBernstein carry a Zacks Rank #2 (Buy), with a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Though both asset managers have similar business trends, deeper research into the financials will help decide which investment option is better.
Both asset managers have outperformed the industry (up 3.1%) in the past year. While shares of AllianceBernstein have gained 24%, Lazard’s stock spiked 21.1%. So, AllianceBernstein performed better than Lazard.
Both companies have been deploying capital in terms of dividend payments to enhance shareholder value. AllianceBernstein has a current dividend yield of 8.42%, while Lazard has a dividend yield of 3.37%.
Although both stocks’ dividend yield is better than the industry’s average of 2.61%, shareholders of AllianceBernstein gain more.
Lazard has debt-to-equity ratio of 1.07 as compared with the industry average of 0.22. But AllianceBernstein, with no debt burden, has an edge over Lazard.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12-months for AllianceBernstein and Lazard is 17.02% and 47.49%, respectively. While both stocks have scored above the industry’s level of 13.02%, Lazard reinvests its earnings more efficiently.
Earnings Estimate Revisions & Growth Projections
The Zacks Consensus Estimate for 2018 earnings of AllianceBernstein increased about 2%, over the last 30 days. On the other hand, the same for Lazard moved 2.5% north for the current year, during the same time frame.
Moreover, earnings for AllianceBernstein for 2018 are projected to jump 13% year over year. For Lazard, the Zacks Consensus Estimate is pinned at $4.58 for 2018, reflecting a year-over-year increase of 21.2%.
Therefore, Lazard has an edge here as well.
Our comparative analysis shows that AllianceBernstein is better positioned than Lazard when considering price performance, dividend yield and leverage ratio. Lazard wins on earnings growth expectations and reinvesting potential.
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