On Jul 5, 2013, we downgraded our recommendation on
) to Underperform from Neutral. The downward revision was based
on the company's first-quarter 2013 adjusted earnings, which
lagged the Zacks Consensus Estimate and reflected a dismal
Financial Advisory Revenues contributed substantially to Lazard's
total revenue comprising about 42% in first-quarter 2013. It is
anticipated that Lazard will continue to rely on financial
advisory fees for a substantial portion of its revenue for the
foreseeable future, and a decline in advisory engagements or the
market for advisory services would adversely affect its business,
financial condition and result of operations. Notably, in
first-quarter 2013, these revenues dropped 39% year over year.
Though operating expenses declined in first-quarter 2013 taking
into account the ongoing cost-savings initiatives, it remained at
elevated levels. Notably, operating expenses were significantly
up on a year-over-year basis in 2012, primary contributors being
a fourth-quarter 2012 charge aggregating $100 million related to
the cost saving initiatives and higher levels of compensation and
benefits expenses (up 16%). The continuation of such a trend is
expected to affect the margin level of the company.
At the current level, asset management businesses are under
cyclical and secular pressures, many of which have been
aggravated by the financial crisis. These pressures include
volatile markets and new regulatory restrictions. Though Lazard
remains well positioned over the long term, given the ongoing
macro headwinds, a limited upside is expected in the near term.
For Lazard, the Zacks Consensus Estimate for 2013 decreased 13.1%
to $1.72 per share, over the last 90 days. For 2014, the Zacks
Consensus Estimate declined 6.8% to $2.34 per share, over the
same time frame.
Lazard is expected to release its second-quarter 2013 earnings on
Jul 25, 2013. The Zacks Consensus Estimate for the second quarter
is 32 cents per share. Zacks Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) for Lazard is -6.25% for the second quarter. This reduces the
chances of a positive earnings surprise, though it carries a
Zacks Rank #3 (Hold).
Other Companies to be Considered
Some investment companies that are worth considering include
Fortress Investment Group LLC
SEI Investments Co.
) with a Zacks Rank #1 (Strong Buy) while
Ameriprise Financial, Inc.
) carries a Zacks Rank #2 (Buy).
AMERIPRISE FINL (AMP): Free Stock Analysis
FORTRESS INVEST (FIG): Free Stock Analysis
LAZARD LTD (LAZ): Free Stock Analysis Report
SEI INVESTMENTS (SEIC): Free Stock Analysis
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