Lazard's Following Quarters Likely to Be Weak, but Upturn Should Be Coming; Shares Undervalued

Lazard’s revenue and earnings are likely to be relatively weak for several more quarters, but there should be a decent upturn after that. As we said after third-quarter results, Lazard’s outperformance in revenue and earnings in the first three quarters of 2022 couldn’t continue; indeed, for the fourth quarter, net revenue declined 28% from a year ago to $712 million, and net income to common shareholders dropped 80% to $42 million, or $0.44 per diluted share. For the full year, net revenue remained fairly resilient with a 13% decline to $2.77 billion, and net income fell 32% to $358 million, or $3.51 per share. We don’t anticipate making a material change to our $52 fair value estimate for narrow-moat Lazard. We maintain our assessment that the shares are undervalued, an opinion that we’ve held for much of the previous year, as we value companies based on through-the-cycle, long-term normalized earnings.