Tuesday, January 21, 2014
Investing in Financial Asset Management Earnings Growth
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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 - Trend 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.
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