) fourth-quarter 2012 adjusted earnings reached 61 cents per
share, significantly beating the Zacks Consensus Estimate of 33
cents. Moreover, results compare favorably with the prior-year
quarter's earnings of 1 cent.
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Better-than-expected results reflect an increase in top line,
elevated assets under management (AUM) levels and a strong
capital position. Yet, increased expenses acted as a dampener.
After considering certain non-recurring items, Lazard's
fourth-quarter 2012 net loss came in at $5 million or 5 cents per
For full year 2012, adjusted earnings reached $195 million or
$1.44 per share compared with $179 million or $1.31 per share in
the prior year. This also exceeds the Zacks Consensus Estimate of
$1.16 per share. Including certain one-time items, net income was
$84 million or 65 cents per share.
Behind the Headlines
In the reported quarter, Lazard's operating revenues, on adjusted
basis, was $573.6 million, up 22% from the prior-year quarter.
The upsurge was mainly attributable to increased financial
advisory revenues coupled with a hike in revenues in the
corporate segment and asset management fees. Moreover, total
revenue surpassed the Zacks Consensus Estimate of $488.0 million.
For full year 2012, operating revenues, on an adjusted basis,
were $1,971.8 million, up 5% year over year. The results also
outpaced the Zacks Consensus Estimate of $1,845.0 million.
Operating expenses grew 2.5% year over year to $456.8 million,
attributable to a rise in compensation and benefits expenses
coupled with higher non-compensation expenses.
The segment's total revenue stood at $309.3 million, increasing
19% from $260.5 million recorded in the year-ago quarter. The
rise was primarily due to a surge in strategic advisory revenues,
partially offset by lower restructuring revenues.
The segment's total revenue was $245.2 million, climbing 20% from
$204.4 million reported in the year-ago quarter. The increase was
primarily due to a rise in management fees, incentive fees and
The segment generated total revenue of $19.1 million compared
with $3.8 million in the year-ago quarter.
Assets Under Management
AUM was recorded at $167 billion as of Dec 31, 2012, up 18% year
over year. The year-over year rise mainly reflected market
appreciation and net inflows. Moreover, AUM jumped 4%
sequentially. Average AUM as of Dec 31, 2012 was $156 billion
compared with $152 billion in 2011.
Lazard boasts a healthy and low-risk financial position with
roughly $850.0 million in cash and cash equivalents as of Dec 31,
2012 compared with $832.9 million as of Sep 30, 2012. Total
stockholders' equity was $570.0 million compared with $713.8
million as of Sep 30, 2012.
During 2012, Lazard repurchased shares worth $355 million at an
average price of $27.66 per share. Notably, during the fourth
quarter 2012, the company repurchased shares worth $132 million
at an average price of $28.76 per share.
Further, the company paid $540 million to shareholders, including
$140 million in dividends and $355 million in share repurchases.
Cost Saving Initiatives
In the prior quarter, Lazard announced cost saving initiatives,
which were expected to record about $125 million in annual
savings from its existing cost base.
Therefore, related implementation expenses of these initiatives
are anticipated to range between $110 million - $130 million and
be mainly compensation-related. The implementation of these
initiatives is on track and in the fourth quarter of 2012, the
company recorded $103 million as associated expenses, with the
remainder projected to occur in the first half of 2013.
Franklin Resources Inc.
) fiscal first quarter 2013 (ended Dec 31) earnings reached $2.42
per share, beating the Zacks Consensus Estimate by 4 cents.
Moreover, results outpaced earnings of $2.31 in the prior
quarter. Better-than-expected results came on the back of higher
revenues. Moreover, increased level of AUM was a tailwind for the
quarter. Yet, higher operating expenses were a dampener.
The sluggish macroeconomic environment coupled with regulatory
issues and increasing expenses will likely put Lazard's
profitability under pressure in the near term. However, we
believe that the company's diverse footprint and cost-curtailment
initiatives will position it comfortably in the long run.
Moreover, capital deployment efforts would further enhance
investors' confidence in the stock.
Shares of Lazard currently carry a Zacks Rank #2 (Buy). Among
Virtus Investment Partners Inc.
Cohen & Steers Inc.
) carry a Zacks Rank #1 (Strong Buy).