Lazard Sees Continued Growth in AUM: Should You Hold? (Revised)

On Jan 5, 2015, we issued an updated research report on Lazard Ltd. (LAZ). The company has been witnessing steady growth in its assets under management (AUM) despite the current cyclical and secular pressures.

For the nine months ended Sep 30, 2014, Lazard’s AUM increased 12% year over year to $198 billion driven by its diversified investment strategies. This uptrend is expected to continue with the slow but steady improvement in the economy.

Moreover, Lazard is well positioned to grow organically, given the consistent rise in its operating revenues. This rise is attributable to increases in asset management fees and financial advisory revenues. However, the company’s significant dependence on financial advisory revenues and overseas markets exposes it to respective risks of a decline in the advisory services markets and engagements, and to the weaknesses in the regional economies.

Lazard had undertaken cost-reduction initiatives in 2012, which are expected to boost its margins in the upcoming quarters. However, the company remains troubled by mounting expenses, which rose 16% year over year for the nine months ended Sep 30, 2014.

Analysts hold mixed views about the company’s future prospects. Over the past 30 days, the Zacks Consensus Estimate for 2014 remained stable at $2.94 per share, while for 2015, it decreased a cent to $3.41 per share.

Lazard currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space include Brookfield Asset Management Inc. (BAM), Janus Capital Group, Inc. (JNS) and Monroe Capital Corporation (MRCC), each sporting a Zacks Rank #1 (Strong Buy).

Disclaimer: This is a revised article. The previous article posted earlier today should not be relied upon.