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Analyst Downgrades Lazard on Valuation

An Oppenheimer analyst moved his Lazard stock rating to "perform," despite the boutique investment bank's report of better-than-expected quarterly results.

Story updated with analyst action and comment.



) -- An analyst downgraded


(LAZ) - Get Lazard Ltd Class A Report

shares on Wednesday, saying the stock was "fully valued" despite the company reporting strong quarterly results earlier in the day.

Oppenheimer's Chris Kotowski changed his stock rating from "outperform" to "perform" and removed his 12-month price target.

"There is nothing not to like about the Lazard story other than valuation," said Kotowski. "We still think the shares are reasonably priced versus the other M&A boutiques, but at nearly 16X our 2011 estimate we feel that they are not cheap and that the private equity companies probably provide more leverage to the M&A cycle."

On Wednesday morning, the boutique investment bank said strong growth in M&A, asset management and capital markets businesses helped propel third-quarter earnings and revenue above Wall Street estimates.

Lazard's net income attributable to common shareholders climbed 18% to $62 million, or 46 cents per share, assuming that all exchangeable shares have been turned into common stock. Excluding special items and the exchange factor, earnings rose 71% to $64 million, or 51 cents per share. Revenue climbed 9% to $475.3 million, with strong growth in asset-management fees and M&A and strategic advisory income boosting the top line.

Lazard easily beat the average analyst's profit estimate of 42 cents per share with revenue of $442.6 million, according to



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"Our core business...reported record revenue for the first nine months," Chairman and CEO Kenneth Jacob said in a statement. "We grew nearly thirty percent in M&A and Strategic Advisory, and Asset Management achieved a record in assets under management, against a backdrop of a gradual but uneven upturn in the cycle."

However, Kotowski was slightly more skeptical of the results: "The 'beat' was roughly half tax rate and half fundamentals," he said.

In late-morning trading, Lazard shares were down 0.7% at $36 amid a broader market decline. The stock alternated between positive and negative territory since the open, but was up from an earlier low of $35.37.

-- Written by Lauren Tara LaCapra in New York


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