Lazard (LAZ) Stock Up on Q2 Earnings & Revenue Beat, AUM Rises

Lazard Ltd LAZ reported second-quarter 2021 adjusted earnings of $1.28 per share, beating the Zacks Consensus Estimate of 89 cents. The reported figure also reflects 91% year-over-year growth.

Higher revenues and growth in assets under management (AUM) favored the results. Most likely due to this, shares of the company gained 3.1%, following the earnings release.

Adjusted net income in the reported quarter was $145.9 million, up 94% year over year. On a GAAP basis, Lazard’s net income was $123 million or $1.08 per share compared with $73 million or 66 cents recorded in the prior-year quarter.

Revenues Rise, Expenses Flare Up

In the second quarter, adjusted operating revenues were a record $821 million, up 51% year over year. The upside resulted from an increase in asset management and financial advisory revenues. The reported figure also outpaced the Zacks Consensus Estimate of $644.5 million.

Adjusted operating expenses were $607.5 million in the quarter, up 42% year over year. Higher compensation and benefits resulted in the upsurge.

Adjusted compensation and benefits expenses rose 50% on a year-over-year basis to $488.8 million. Adjusted non-compensation expenses for the quarter were $118.8 million, up 19% year over year.

The ratio of compensation expenses to operating revenues was 59.5%, down from the year-earlier quarter’s 60%. The ratio of non-compensation expenses to operating revenues was 14.5% compared with the year-ago quarter’s 18.3%.

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 adjusted revenues were $471 million, up 61% from the year-earlier quarter.

Asset Management: The segment’s adjusted revenues were $342 million, up 40% from the prior-year quarter.

Corporate: The segment generated $6.9 million adjusted revenues, up 48% from the prior-year quarter.

Growing AUM

As of Jun 30, 2021, AUM was recorded at $277 billion, up 29% from the prior-year quarter. The quarter witnessed a market appreciation of $12 billion, foreign-exchange appreciation of $1.2 billion and net outflows of $0.8 billion.

Average AUM came in at $276 billion, up 32% year over year.

Deteriorating Balance Sheet

Lazard’s cash and cash equivalents totaled $980 million as of Jun 30, 2021, compared with $1.4 billion as of Dec 31, 2020. The company’s stockholders’ equity was $931.9 million compared with $999.4 million as of Dec 31, 2020.

Steady Capital-Deployment Activity

In the second quarter, Lazard repurchased 2.4 million shares at an average cost of $45.72 per share and paid out dividends of $50 million. As of the second-quarter end, the company had $366 million remaining in its share-repurchase authorization.

Our Viewpoint

Results reflect Lazard’s impressive performance in the June-end quarter. Although diverse footprint, steady capital-deployment activities and revenue growth position the company favorably for the long haul; macro headwinds, elevated expenses and overall outflows are straining its financials.

Lazard Ltd Price, Consensus and EPS Surprise

Lazard Ltd Price, Consensus and EPS Surprise

Lazard Ltd price-consensus-eps-surprise-chart | 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

Affiliated Managers Group Inc.’s AMG second-quarter 2021 economic earnings of $4.03 per share surpassed the Zacks Consensus Estimate of $3.82. The bottom line grew 47.1% year over year.

Federated Hermes FHI reported second-quarter 2021 earnings per share of 67 cents, in line with the Zacks Consensus Estimate. The figure, however, compared unfavorably with the prior-year quarter earnings of 80 cents.

Ameriprise Financial’s AMP second-quarter 2021 adjusted operating earnings per share of $5.27 surpassed the Zacks Consensus Estimate of $5.23. The bottom line reflected a rise of 39.4% from the year-ago quarter. Notably, the prior-year quarter figure excluded net operating loss tax impacts.

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