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27 October
Lazard (LAZ) Q3 Earnings & Revenues Miss, Expenses Dip Y/Y

Lazard Ltd. LAZ reported a third-quarter 2023 adjusted net income of 10 cents per share, which missed the Zacks Consensus Estimate of 19 cents. The bottom line also compared unfavorably with the prior-year quarter’s $1.05.

Results were hurt by declines in revenues and the assets under management (AUM) balance. Nonetheless, lower expenses were tailwinds.

On a GAAP basis, Lazard’s net income was $7 million compared with $106 million in the prior-year quarter.

Revenues & Expenses Decline

Quarterly adjusted operating revenues totaled $531.6 million, down 27% year over year. Also, the top line missed the Zacks Consensus Estimate of $592.6 million.

Operating expenses were $528.77 million, down 7% year over year. Our estimate was pegged at $671 million. A decline in compensation and benefits expenses helped the company lower the metric.

The ratio of adjusted compensation expenses to operating revenues was 68.4%, up from the year-earlier quarter’s 60%. The ratio of non-compensation expenses to operating revenues was 25.9%, up from the year-ago quarter’s 17.7%.

Quarterly Segmental Performance Weak

Financial Advisory: The segment’s adjusted operating revenues were $261.4 million, down 42% from the year-earlier quarter. We had projected the metric to be $346.5 million.

Asset Management: Segmental adjusted operating revenues of $262.16 million fell marginally from the prior-year quarter. Our estimation was $252.9 million.

Corporate: Adjusted operating revenues from this segment were $8.01 million, up 9% from the year-earlier quarter. Our estimation was $2.3 million.

AUM Declines

As of Sep 30, 2023, total AUM was $228 billion, down 5% from the prior quarter. Our model predicted the metric to be $240.38 billion.

The quarter witnessed a market depreciation of $5.8 billion, a foreign exchange depreciation of $3.3 billion and net outflows of $2 billion. Our estimate for net outflows was pegged at $1.12 billion.

The average AUM in the reported quarter was $236 billion, up 11% year over year. Our estimate was pinned at $239.86 billion.

Balance Sheet Position Weak

Lazard’s cash and cash equivalents totaled $653 million as of Sep 30, 2023, compared with $1.23 billion as of Dec 31, 2022. Stockholders’ equity was $419.5 million compared with $675.3 million as of Dec 31, 2022.

Capital Deployment Update

In the first nine months of 2023, Lazard repurchased 2.8 million shares.

As of Sep 30, 2023, the company’s remaining share repurchase authorization was $200 million.

Our Viewpoint

Strategic buyouts, a well-laddered debt maturity profile and the introduction of investment strategies are positives for Lazard. Impressive cost-control efforts are expected to support bottom-line growth.

A challenging operating backdrop and geopolitical concerns are likely to affect its financials in the near term.

Lazard Ltd Price, Consensus and EPS Surprise

Currently, Lazard carries a Zacks Rank #4 (Sell).

Performance of Other Asset Managers

BlackRock, Inc.’s BLK third-quarter 2023 adjusted earnings of $10.91 per share handily surpassed the Zacks Consensus Estimate of $8.52. Also, the figure reflects an increase of 14.2% from the year-ago quarter.

BLK’s results benefited from a rise in revenues and higher non-operating income. Further, the AUM balance witnessed improvement. However, higher expenses acted as a headwind for BLK.

Invesco’s IVZ third-quarter 2023 adjusted earnings of 35 cents per share lagged the Zacks Consensus Estimate of 36 cents. The bottom line, however, rose 2.9% from the prior-year quarter.

IVZ’s results were hurt by a rise in operating expenses and lower revenues. Nevertheless, an increase in the AUM balance on decent inflows aided the results to some extent.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.