Investment managers’ performance is likely to be affected by uncertainty in several matters prevailing in the markets, including the Fed’s recent rate cut, the U.S.-China trade war and global turmoil. Further, margin compression and escalating compliance and technology costs are likely to thwart profits in the near term.
Nevertheless, 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 companies’ top-line growth. Moreover, these asset managers registered revenue growth in the June-end quarter on the back of increase in assets under management (AUM).
Performance of equity markets remained favorable during the first half of 2019, as suggested by the nearly 17.2% growth of the S&P 500 Index, which resulted in a 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 $2.8 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. Lazard operates as a financial advisory and asset management firm, globally, and has a market cap of $4.5 billion.
Both Lazard and AllianceBernstein carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 (down 16.7%) in the past three months. While shares of AllianceBernstein have lost around 0.2%, Lazard’s stock spiked 2.8%. So, Lazard performed better than AllianceBernstein.
Both companies have been deploying capital in terms of dividend payments to enhance shareholder value. AllianceBernstein has a current dividend yield of 7.72%, while Lazard has a dividend yield of 5.33%.
Although both stocks’ dividend yield is better than the industry’s average of 2.83%, shareholders of AllianceBernstein gain more.
Lazard has a debt-to-equity ratio of 3.11 compared with the industry average of 0.46. 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 15.54% and 47.09%, respectively. While both stocks have scored above the industry’s level of 13.24%, Lazard reinvests its earnings more efficiently.
Earnings Estimate Revisions & Projections
The Zacks Consensus Estimate for 2019 earnings of AllianceBernstein has been unchanged over the last 60 days. The same for Lazard moved 3.7% south for the current year, during the same time frame.
Moreover, AllianceBernstein’s 2019 earnings are projected to decline 10.1% year over year. For Lazard, the Zacks Consensus Estimate is pinned at $3.35 for 2019, reflecting a year-over-year decrease of 19.5%.
Therefore, AllianceBernstein has an edge here as well.
Our comparative analysis shows that AllianceBernstein is better positioned than Lazard when considering earnings expectations, dividend yield and leverage ratio. Lazard wins on price performance and reinvesting potential.
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