Lazard (LAZ) Q1 Earnings Beat on Higher Revenues, Costs Rise

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Following the positive earnings surprise of 18.9% in first-quarter 2018, shares of Lazard LAZ jumped 3.28%. The company reported adjusted earnings of $1.26 per share, comfortably surpassing the Zacks Consensus Estimate of $1.06. Further, the reported figure came in higher than the prior-year quarter figure of 83 cents.

Top-line strength and growth in assets under management (AUM) were positives. However, escalating expenses was an undermining factor.

Adjusted net income in the quarter came in at $166 million, up 51% year over year. On a GAAP basis, Lazard's net income came in at $160 million or $1.21 per share compared with $108 million or 81 cents recorded in the prior-year quarter.

Revenues Escalate, Cost Pressure Persists

In the first quarter, adjusted operating revenues came in at $724 million, up 16% year over year. The upsurge can chiefly be attributed to increase in financial advisory and asset-management revenues.

Adjusted operating expenses were around $518.1 million in the quarter, up 12.6% year over year. Higher compensation and benefits, and non-compensation expenses led to the upswing.

Adjusted compensation and benefits expense flared up 14%, on a year-over-year basis, to $404 million. Adjusted non-compensation expense for the quarter came in at $114.1 million, up 6% year over year.

The ratio of compensation expense to operating revenues was 55.8%, down from 56.5% in the prior-year quarter. The ratio of non-compensation expense to operating revenues was 15.8% compared with 17.2% reported in the year-ago quarter.

The company affirmed its annual targets of an adjusted non-compensation expense-to-revenue ratio between 16% and 20%, while the compensation-to-operating revenue ratio target is in the mid-to high 50 percentage range.

Segment Performance

Financial Advisory: The segment's total revenues came in at $389 million, up 16% from the year-earlier quarter. The uptick primarily stemmed from increase in revenues from M&A advisory, partially offset by lower restructuring revenues.

Asset Management: The segment's total revenues were $330 million, up 18% from the prior-year quarter. Higher management and other fees led to this rise.

Corporate: The segment generated total revenues of $5.2 million, which plunged 49% from the prior-year quarter.

Strong Assets Under Management (AUM)

As of Mar 31, 2018, AUM was recorded at $251.7 billion, up 17% year over year. The quarter experienced market and foreign exchange depreciation of $186 million and net inflows of $2.4 billion.

Average AUM came in at $255.8 billion, rising 23.9% year over year.

Stable Balance Sheet

Lazard's cash and cash equivalents totaled $962 million as of Mar 31, 2018, compared with $1.48 billion recorded as of Mar 31, 2017. The company's stockholders' equity was $1.06 billion compared with $1.26 billion as of Mar 31, 2017.

Steady Capital-Deployment Activity

During first-quarter 2018, Lazard returned $449 million to its shareholders. This included dividend payment of $202 million, share repurchase of $146 million and $101 million paid for meeting employee-tax obligations in exchange of share issuances upon vesting of equity grants.

Our Viewpoint

Results reflect an impressive quarter for Lazard. Though the company's diverse footprint, steady capital-deployment activities and revenue strength position it favorably for the long run, macro headwinds, elevated costs pressure and stringent regulations put the company's financials under strain.

Lazard Ltd Price, Consensus and EPS Surprise

Lazard Ltd Price, Consensus and EPS Surprise | Lazard Ltd Quote

Currently, Lazard carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .    

Competitive Landscape

BlackRock's BLK first-quarter 2018 adjusted earnings came in at $6.70 per share, which handily outpaced the Zacks Consensus Estimate of $6.42. Additionally, the bottom line came in 28% higher than the year-ago quarter. Results benefited from an improvement in revenues, rise in AUM and steady long-term inflows. However, increase in operating expenses acted as a headwind.

Ameriprise Financial's AMP first-quarter adjusted operating earnings per share of $3.70 comfortably surpassed the Zacks Consensus Estimate of $3.47. Also, the figure came in 37% higher than the year-ago quarter level. Results benefited from an improvement in revenues. Also, growth in AUM and assets under administration (AUA) supported the earnings. However, a rise in expenses was an undermining factor.

T. Rowe Price Group TROW reported earnings per share of $1.77 for first-quarter 2018, which lagged the Zacks Consensus Estimate of $1.78. Further, the bottom line improved 14.9% from the year-ago figure of $1.54. First-quarter results reflect escalating expenses. However, higher revenues and AUM were the positive factors. Also, the company's strong balance-sheet position, along with ample liquidity, was the other tailwind.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: TROW , AMP , BLK , LAZ

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