On Jan 2, 2014, we upgraded our recommendation on Lazard Ltd. (LAZ) to Outperform from Neutral. The company has been witnessing rising earnings estimates over the last 30 days, which helped the company to upgrade. Moreover, the company’s third-quarter 2013 adjusted earnings significantly surpassed the Zacks Consensus Estimate and compared favorably with the prior-year quarter figure.
Why the Upgrade?
Lazard has been witnessing rising earnings estimates over the last 30 days. The Zacks Consensus Estimate for 2013 increased around 1% to $1.78 per share. For 2014, the Zacks Consensus Estimate rose 1.6% to $2.48 per share, over the same time frame. We expect its improving fundamentals to gain analysts’ confidence in the upcoming quarters as well.
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 the first nine months of 2013, the company returned $294 million to shareholders and recently declared a special dividend of 25 cents per Class A common stock. 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.
Currently, Lazard carries a Zacks Rank #2 (Buy).
Other Companies to Consider
Other investment companies that are worth considering include Waddell & Reed Financial, Inc. (WDR) with a Zacks Rank #1 (Strong Buy), while GAMCO Investors, Inc. (GBL) and Ameriprise Financial, Inc. (AMP) carry a Zacks Rank #2.