Bull of the Day: Lazard (LAZ)

By Neena Mishra, Jan 20, 2014

Investment Management and Financial Advisory industry is expected to report strong results for Q4 2013. Now may be a good time to consider a Zacks Rank # 1 (Strong Buy) from this top rated industry.
About the Company
Lazard Ltd. (LAZ - Analyst Report) is a leading global financial advisory and asset management firm with more than $175 billion in AUM. It operates from 40 cities across 26 countries in North America, Europe, Asia, Australia, Central and South America.
The firm provides advice on mergers and acquisitions (M&A), strategic matters, restructuring and capital structure, capital raising and corporate finance, as well as asset management services.
Excellent Third Quarter Results
Lazard reported it Q3 results on October 24, 2013. Adjusted earnings for the quarter came in at $0.46 per share, handily beating the Zacks Consensus Estimate of $0.35 per share and significantly up from $0.26 per share earned in the same quarter last year.
Excellent results were driven by strong top-line performance, thanks mainly to increase in financial advisory as well as asset management revenues.
AUM increased 10.0% year over year to $176.5 billion. The rise was a result of considerable market appreciation and net inflows of $1.7 billion in the quarter.
The financial position remained strong with about $688.4 million in cash and cash equivalents as of the end of the quarter.
Positive Earnings Estimates Revisions and Rank/Recommendation Upgrade
Lazard has been witnessing rising earnings estimates ahead of the fourth quarter results. The Zacks Consensus Estimate for 2013 and 2014 are $1.79 per share and $2.49 per share respectively, up from $1.77 per share and $2.44 per share, 60 days ago. LAZ has delivered positive earnings surprise in three out of last four quarters, with an average quarterly surprise of 36%.
As a result of positive earnings momentum, LAZ earned a Zacks Rank #1 (Strong Buy) and an “Outperform” recommendation earlier this month.
Return of Capital to Shareholders
The company has an excellent record of returning cash to shareholders. During the first three quarters of 2013, the company returned $294 million of capital to shareholders through dividends and share repurchases.
Subsequently on December 10, 2013, Lazard announced a special dividend of $0.25 per share on its Class A common stock.

The Bottom Line
Investment Management industry is expected to report excellent earnings for the fourth quarter thanks mainly to higher asset inflows and equity prices. In fact, the industry is currently ranked
15 out of 265 (top 6%). The financial advisory business has also been doing very well.

LAZ’s top Zacks rank coupled with top industry rank indicates strong chances of outperformance in the coming months.



Earlier this month, Renault-Nissan Alliance Chairman and CEO Carlos Ghosn visited Stanford GSB to discuss his experience leading the global automobile alliance and its subsequent innovations. Watch the full video of his View From The Top talk here, or view key #GSBVFTT takeaways below:





For me the EM switch flipped in 2012. We’d had inflows and bull markets for 12 years—well before QE. Now, the outflows come. Doesn’t matter what the trigger was. It’s on. It was just a matter of time.

The path, the tricky part, will be fits and starts. Valuations won’t matter until we can tell a compelling growth story and too many EM countries have to work through all the domestic debt they built up during boom. Currency spasms and deleveraging raise the risk of policy errors in certain cases. EM fixed income is most vulnerable because outflows haven’t really even started there. And it would be worse if I were really bearish Treasuries, which I’m not. People will overstate how bad fundamentals are as price action worsens, and tourists (crossover investors), who are in control of the flows, will mostly revert to old school EM biases, even though many things, fundamentally, are different (better) this time. Gone is the fixed FX regime and original sin. Domestic EM financial markets are deeper. Reserves are higher. But don’t try and fight the old school and their anachronistic biases. They are bigger than you are.

This is the smartest thing we’ve yet read on this sell off in the emerging markets.