On Sep 18, 2013, we upgraded our recommendation on Lazard Ltd. (LAZ) to Neutral from Underperform. The upward revision was based on the company’s second-quarter 2013 adjusted earnings, which significantly surpassed the Zacks Consensus Estimate. Moreover, results compared favorably with the prior-quarter earnings. Further, strong top-line growth and ongoing cost-curtailment initiatives added fuel to the fire.
Why Neutral?
Lazard is diligently working on its cost-containment measures. In 2012, the company announced cost saving initiatives, which were expected to record about $125 million in annual savings from its existing cost base. The company has exceeded its target and now anticipates total annual savings of about $160 million, partially offset by investment in business. Moreover, two-third of the expense savings is anticipated to be realized in 2013, and full in 2014.
Lazard is an asset for yield-seeking investors due to its strong capital deployment activity. Since the beginning of 2010, it has doubled its quarterly dividend and returned more than $1 billion in capital to shareholders. Moreover, in first-half 2013, the company returned $230 million to shareholders. These actions are bound to boost investors’ confidence.
At the current level, asset management businesses are under cyclical and secular pressures, many of which have been aggravated by the financial crisis. These pressures include volatile markets and new regulatory restrictions. Though Lazard remains well positioned over the long term, given the ongoing macro headwinds, a limited upside is expected in the near term.
For Lazard, the Zacks Consensus Estimate for 2013 increased 3.7% to $1.70 per share, over the last 60 days. For 2014, the Zacks Consensus Estimate surged 0.9% to $2.27 per share, over the same time frame. Currently, Lazard carries a Zacks Rank #3 (Hold).
Other Companies to Consider
Some investment companies that are worth considering include GAMCO Investors, Inc. (GBL) with a Zacks Rank #1 (Strong Buy) while Fortress Investment Group LLC (FIG) and Ameriprise Financial, Inc. (AMP) carry a Zacks Rank #2 (Buy).
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