Driven by top-line growth,
) first-quarter 2014 adjusted earnings came in at 61 cents per
share, easily beating the Zacks Consensus Estimate of 55 cents.
Moreover, this compares favorably with 28 cents earned in the
Our proven model predicted that Lazard may post an earnings beat
as it has the right combination of two key ingredients - positive
and a Zacks Rank #3 (Hold) or higher. It had a positive Earnings
ESP with a Zacks Rank #2 (Buy).
Better-than-expected results were driven by strong top-line
performance, primarily aided by increase in financial advisory as
well as asset management revenues. Moreover, the company's strong
capital position and higher assets under management (AUM) were
the positives. However, elevated expenses exhibited undisciplined
After considering certain non-recurring items, Lazard's
first-quarter 2014 net income came in at $81 million or 61 cents
per share compared with $15 million or 12 cents per share in the
Performance in Detail
In the first quarter, adjusted operating revenues came in at
$540.2 million, up 31% year over year. The rise was mainly
attributable to increase in financial advisory revenues and asset
management fees. Moreover, revenues surpassed the Zacks Consensus
Estimate of $512.0 million.
Operating expenses were $420.8 million, up 20.9% year over year.
The upsurge stemmed from higher compensation and benefits
expenses as well as elevated non-compensation expenses.
Adjusted non-compensation expense for the first quarter was $103
million, up 3% year over year. The ratio of non-compensation
expense to operating revenue was 19.1% compared with 24.1% in the
For 2014, the company targets an adjusted non-compensation
expense-to-revenue ratio between 16% and 20%, while adjusted
compensation ratio to be in the mid-to high-50s percentage range.
The segment's total revenue was $275.5 million, up 64% from the
prior-year quarter. The rise was primarily due to increase in
M&A and other advisory revenues, partially offset by
decreased restructuring operating revenue.
The segment's total revenue was $262.3 million, up 9% from the
prior-year quarter. The rise was driven by increase in management
fees, other revenues and incentive fees.
The segment generated total revenue of $2.4 million, down 56%
year over year.
Assets Under Management
AUM was recorded at $189 billion as of Mar 31, 2014, up 10% year
over year. The company recorded net inflows of $0.8 billion and
market appreciation of $1.7 billion. Average AUM as of Mar 31,
2014, came in at $186 billion, up 9% year over year.
Lazard boasts a healthy and low-risk financial position with
roughly $666.6 million in cash and cash equivalents as of Mar 31,
2014, compared with $841.5 million as of Dec 31, 2013. Total
stockholders' equity was $555.6 million compared with $630.0
million as of Dec 31, 2013.
During first-quarter 2014, Lazard returned $225 million to
shareholders. This included share repurchase of Class A common
stock worth $107 million, dividend payment worth $36 million,
along with $82 million paid for meeting employee tax obligations
in exchange of share issuances upon vesting of equity grants.
Further, Lazard repurchased 2.6 million shares at an average
price of $44.77 year-to-date. As of Mar 31, 2014, the company had
a remaining share repurchase authorization worth $15 million.
Recently, Lazard's board of directors also authorized additional
share repurchases of up to $200 million, expiring on Dec 31,
Among other asset managers,
Franklin Resources Inc.
) March quarter-end results missed the Zacks Consensus Estimate,
Affiliated Managers Group Inc.
Ameriprise Financial, Inc.
) outpaced the Zacks Consensus Estimate.
The sluggish macroeconomic environment, stringent regulations and
net outflows might put Lazard's profitability under pressure in
the near term. However, we believe that the company's diverse
footprint and cost containment initiatives position it favorably
in the long run. Moreover, Lazard's capital deployment efforts
are expected to further enhance investors' confidence in the
AFFIL MANAGERS (AMG): Free Stock Analysis
AMERIPRISE FINL (AMP): Free Stock Analysis
FRANKLIN RESOUR (BEN): Free Stock Analysis
LAZARD LTD (LAZ): Free Stock Analysis Report
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