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Stock Strategist Industry Reports

Three Moaty Stocks Leveraged to M&A

A stabilized economic environment and resulting increase in mergers and acquisitions should lead to significant earnings momentum for these three firms.

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We believe the independent, financial advisory-focused investment banks ( Evercore Partners (EVR),  Greenhill (GHL), and  Lazard (LAZ)) are some of the more growth-oriented stocks that we cover. We expect them to report record revenue and significantly higher earnings in the next two to three years. The record revenue will be driven by higher revenue-generating managing director head count, an increase in managing director productivity, and higher assets under management. An equal, if not greater, contributor to record earnings will be operating margin expansion from leveraging of expenses, decrease in legacy equity amortization, and maturing of new initiatives.

Revenue Driven by Head Count, Productivity
A company's financial advisory revenue in any particular quarter can differ materially from management or analyst forecasts based on the timing of large deal closings or nonpublic transactions, but over a longer period, financial advisory revenue is driven by the number of client-facing senior revenue producers and their productivity.

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Michael Wong does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.