Updated includes additional earnings estimates and price targets.

NEW YORK ( TheStreet) -- It's not a zero sum game on Wall Street anymore. As the first quarter of 2012 draws to a close, some investment banking businesses are booming, while others haven't regained momentum after a second half swoon to 2011.

First quarter 2012 earnings are set to reflect a continued M&A lull and analysts are beginning to cut estimates for boutique advisory businesses that specialize in providing deal advice. Investment banks with global trading businesses, on the other hand, are set to see a bond trading based surge that will help the industry recover from stress tests, regulatory reform and recent highly provocative Op-Ed pieces about the industry's morals.

Since the crisis, debt underwriting has been a key to earnings in some quarters for the likes of Goldman Sachs ( GS - Get Report), Morgan Stanley ( MS - Get Report) and JPMorgan Chase ( JPM - Get Report).

On the heels of a European Central Bank-driven refinancing boom across the Atlantic and a flurry of U.S. corporations looking to issue bonds at low interest rates, the debt markets have boomed, with analysts raising their earnings estimates of top investment banks.

According to Bloomberg compilations of first quarter earnings estimates, analysts have spent the last 4 weeks upping revenue and profitability targets at Goldman Sachs, JPMorgan and Morgan Stanley.

But a rising debt tide hasn't lifted all boats on Wall Street.

At this time last year, merger activity was just beginning to hit its quickest post-crisis time stride, with companies using cash piles and low valuations to cut deals. After that activity slowed on renewed fears of a credit crunch beginning in August, dealmakers have yet to regain their step. A lack of merger activity now looks to be a headwind for "boutique" advisory leader Lazard ( LAZ ) according to analysts, with the potential for a re-rating of expectations for competitors like Evercore Partners ( EVR ) and Greenhill ( GHL).

On Thursday, Bank of America Merrill Lynch analyst Guy Moszkowski downgraded Lazard shares to "underperform," cutting the top M&A "boutique's" price target from $28 to $26. "While we still believe that Lazard's marquee Advisory franchise will generate strong margins at some point, the legacy compensation drag, combined with still middling M&A activity, suggest that recent rally is overdone, as consensus estimates will need to fall further, in our view," wrote Moszkowski. It's a signal that M&A expectations may have outrun reality as record levels of corporate cash haven't fully put C-suite executives in an acquisition mindset.

"We expect compensation expense to remain a headwind for the company in 2012, which could be exacerbated by any further slowdown in the M&A market. However, we continue to believe that the firm remains well positioned," wrote KBW analyst Joel Jeffrey in a February note reacting to Lazard's fourth quarter earnings and its 2012 outlook. Those earnings showed that high compensation to revenue levels are still a headwind. Nevertheless, as Jeffrey cut his earnings per share estimates to $0.29 for the first quarter from $0.33, he continued to rate Lazard's stock an "outperform," with a $35 a share price target.

That sentiment is matched by Credit Suisse analyst Howard Chen, who maintained the advisory firm's earnings targets on an M&A backlog of $131 billion in deals that it's advised on, but hasn't yet closed. However, as part of his "outperform" rating and $30 a share price target, Chen expects that M&A will increase by 20% in 2012. A continuation of still tepid deal markets may make those projections too optimistic.

Merger activity has fallen over 25% in 2012, according to data compiled by Dealogic as of Thursday. For advisory firms like Evercore Partners and Greenhill, a backlog of deals should support first quarter revenue, with analysts still optimistic on their fundamentals. But, if deals aren't replaced by new activity, the premium price-to-earnings multiples given to "boutiques" may fall. Analyst's peg Lazard, Evercore Partners and Greenhill's price-to-earnings estimates at nearly 20x, holding share price targets of $33.13, $34.29 and $46.81, respectively according to Bloomberg data.

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An opposite dynamic may in store for full service investment banks. Dealogic data shows that debt underwriting is up nearly 6% year-to-date when compared to a strong 2011 start. Meanwhile, even management commentary may have been too pessimistic on trading headed into 2012.

JPMorgan Chief Executive Jamie Dimon urged reporters to "forget trading" at its investment bank on a fourth quarter earnings call. He tried to focus on the firm's loan growth, which increased 4% quarter-on-quarter. While the bank's Main Street lending business is expected to show continued strength, don't discount its Wall Street operations in 2012. The bank currently tops the red-hot debt underwriting league tables and has reclaimed the M&A top spot .

Analysts continue to boost their expectations for top investment banking giants like JPMorgan that have strong businesses across the spectrum of Wall Street debt, equity and merger activity.

Morgan Stanley analyst Betsy Graseck upped her JPMorgan price target to $45 a share on market share gains and a "reduced European risk," as the region moves past the Greek crisis. Graseck raised her 2013 earnings estimate by 2 cents to $5.20 a share, while leaving her 2012 EPS estimate unchanged at $4.46.

Among large U.S. banks, UBS highlights JPMorgan as a top pick because of its earnings stability. "We recently made JPM our top pick in the group, as we believe the stability in JPM's earnings warrants a higher multiple," wrote analyst Brennan Hawken in a Mar. 8 note. He gives JPMorgan a $44 a share price target on 2012 earnings per share of $4.50.

Expectations for Goldman Sachs are also getting a lift from analysts, with Jeffrey Harte of Sandler O'Neill leading the way earlier in March. After speaking with management, Harte raised his first quarter earnings per share estimate for Goldman Sachs to $3.61 from $2.97 on a rally of risk assets like high yield bonds. " High cash levels and a hunt for yield have already boosted risk asset prices and recently resumed central bank easing sets the stage for what "could be a really big rally," wrote Harte of management comments.

KBW analyst David Konrad upped his earnings per share estimates for Goldman Sachs in a Mar. 14 note, on expectations that weak M&A and IPO activity will be mitigated by a strong quarter for debt underwriting. "Although we forecast M&A and ECM activity to decline, we have Goldman Sach's investment banking revenues essentially flat due to the strong pick-up in DCM revenue that we expect this quarter," noted Konrad, who raised his first quarter earnings per share estimates to $3.30 from $2.95.

On Friday, CLSA analys Mike Mayo raised his price target for Goldman Sachs to $145 from $130, while maintaining an "outperform" rating. Also on Friday, Deutsche Bank analyst Michael Carrier cut his price target on Morgan Stanley from $28 to $22, noting the bank's valuation and its smaller-than-peer debt trading operations. Morgan Stanley isn't a top-10 debt underwriter in 2012, according to Dealogic data.

Overall, analysts polled by Bloomberg give JPMorgan shares a price target of $47.75, with 34 "buy" ratings to go with 4 "holds." Goldman Sachs and Morgan Stanley shares warrant price targets of $132.10 and $21.95, respectively.

In first quarter 2012 earnings, watch for outperformance by banks with winning debt trading businesses, while M&A specialists struggle on lackluster activity.

Written by Antoine Garain New York.