) first-quarter 2013 adjusted earnings reached 28 cents per
share, lagging the Zacks Consensus Estimate of 35 cents.
Moreover, this compares unfavorably with the prior quarter's
earnings of 61 cents.
Lower-than-expected results reflect a dismal top-line
performance, primarily aided by reduced financial advisory
revenues. However, elevated assets under management (AUM) levels
and a strong capital position were the tailwinds. Moreover, a dip
in expenses reflects the success of the company's cost-saving
After considering certain non-recurring items, Lazard's
first-quarter 2013 net income came in at $15.4 million or 12
cents per share.
Behind the Headlines
In the reported quarter, Lazard's operating revenues, on an
adjusted basis, came in at $414 million, down 28% from the prior
quarter. The fall was mainly attributable to decreased financial
advisory revenues coupled with a decline in revenues in the
corporate segment and asset management fees. Moreover, total
revenue missed the Zacks Consensus Estimate of $469.0 million.
Operating expenses decreased 24% sequentially to $348 million,
attributable to lower compensation and benefits expenses coupled
with reduced non-compensation expenses.
The segment's total revenue stood at $168 million, decreasing 46%
from $309 million recorded in the prior quarter. The decrease was
primarily due to a fall in strategic advisory revenues and lower
The segment's total revenue was $240 million, inching down 2%
from $245 million reported in the prior quarter. The reduction
was mainly due to a fall in incentive fees, partially offset by a
surge in management fees and other revenues.
Corporate: The segment generated total revenue of $6 million
compared with $19 million in the prior quarter.
Assets Under Management
AUM was recorded at $172 billion as of Mar 31, 2013, up 3%
sequentially. The sequential rise mainly reflects market
appreciation, partially offset by net outflows. Moreover, AUM
jumped 10% year over year. Average AUM as of Mar 31, 2013 came in
at $171 billion compared with $156 billion as of Dec 31, 2012.
Lazard boasts a healthy and low-risk financial position with
roughly $586 million in cash and cash equivalents as of Mar 31,
2013 compared with $850 million as of Dec 31, 2012. Total
stockholders' equity was $497 million compared with $570 million
as of Dec 31, 2012.
During 1Q13, Lazard returned $176 million to shareholders. This
includes share repurchases of Class A common stock worth $59
million along with $117 million paid for meeting employee
tax obligations in exchange of share issuances upon vesting of
equity grants. Further, the repurchases were at an average price
of $32.85 per share.
On Apr 25, 2013, Lazard's board of directors voted for a 25% hike
in the quarterly dividend on outstanding Class A common stock.
The increased dividend stood at 25 cents per share, up from 20
cents. The new dividend will be paid on May 24, 2013, to
stockholders of record on May 6, 2013.
Cost Saving Initiatives
In 2012, Lazard announced cost saving initiatives, which were
expected to record about $125 million in annual savings from its
existing cost base. Much of the cost saving initiatives has been
completed. Moreover, two-thirds of the expense savings are
anticipated to be realized in 2013, and full in 2014.
Notably, in the quarter under review, related implementation
expenses came in at about $26 million, while in the prior quarter
expenses stood at about $103 million. The total implementation
expenses summed to about $129 million.
The sluggish macroeconomic environment coupled with regulatory
issues and a decline in top line 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 #3 (Hold). Among
other investment managers,
Legg Mason Inc.
Franklin Resources Inc.
) are scheduled to release March quarter-end earnings on Apr
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