Lazard Ltd. (LAZ), the largest independent merger-advisory firm, reported first-quarter profit that missed analysts’ estimates as revenue declined.
Net income fell 40 percent to $15.4 million, or 12 cents a share, from $25.6 million, or 20 cents, a year earlier, the Hamilton, Bermuda-based company said today in a statement. Adjusted earnings, which exclude some items, were 28 cents a share, compared with the 31-cent average estimate of 11 analysts surveyed by Bloomberg. The firm boosted its quarterly dividend 25 percent to 25 cents per share.
Lazard Chief Executive Officer Ken Jacobs, 54, told investors in February that the next few months will determine whether a shift in corporate sentiment leads to an upturn in dealmaking amid improving valuations and available financing. Global merger-and-acquisition volume declined 1.5 percent in the first quarter from a year earlier, following a year in which total dollar volume dropped for the first time since 2009, according to data compiled by Bloomberg.
“Advisory had a soft quarter,” Jacobs said in a phone interview following the results. “It’s reflective of the volatility in the markets six to nine months ago because there’s a lag between announcements and closings.”
Financial-advisory revenue fell 39 percent to $168 million from a year earlier, according to the statement. That was partly because some transactions closed in the fourth quarter, when global M&A volume was the highest since the third period of 2008, instead of in the first quarter, Jacobs said.
“We had an acceleration of closings into the fourth quarter in middle market and probably a few more than we expected in some of the large stuff,” he said.
Rising equity markets boosted first-quarter asset management revenue, which increased 14 percent to $240 million, Jacobs said. The Standard & Poor’s 500 Index (SPX) gained 10 percent in the period.
Lazard’s operating revenue declined 17 percent to $414 million from a year earlier, according to the statement. The company set aside $248 million, or 60 percent of revenue, for compensation in the period, compared with $313 million, or 63 percent, a year earlier.
Last year, Lazard announced a cost-cutting plan targeting $125 million in annual savings. That led to about $26 million in implementation expenses in the first quarter, according to the statement. The “bulk” of the initiatives are complete, Chief Operating Officer Alex Stern said today in an interview.
As Lazard implemented those cost reductions, the company found another $10 million to $20 million to cut as well, Stern said.
Lazard rose 14 cents, or 0.4 percent, to close at $33.30 in New York. The shares have climbed 12 percent this year, compared with the 13 percent gain of the Russell 1000 Financial Services Index.
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