Investors knew that Lazard
In the fiscal fourth quarter, revenues increased 29% to $472.9 million, and earnings increased 50% to $85.8 million or $0.78 per share.
Lazard's core business is providing advisory services for M&A transactions. In fact, since 1848, the firm has built a sterling brand and a global footprint. Moreover, CEO Bruce Wasserstein is a legendary deal-maker.
All of this certainly helps snag big-time advisory engagements. Some of the deals in the quarter include:
(NYSE:PFE)$16.6 billion spin-off of its health-care division to Johnson & Johnson (NYSE:JNJ)
(NYSE:GM)sale of GMAC to Cerberus Capital for $14 billion.
Bank of New York's
(NYSE:BK)$16.5 billion merger with Mellon Financial (NYSE:MEL).
Lazard is also getting traction with its asset-management business. For example, in 2006, segment revenues increased 18% to $548 million, and net inflows of assets were $2.8 billion. In all, the firm has about $110 billion under management.
In light of the strong growth, it should be no surprise that Lazard has a hefty valuation in terms of P/E and price-to-book ratios, at least compared with larger investment banks, such as Goldman Sachs and Morgan Stanley
Lazard still faces risks; the company is fairly undiversified, and the M&A business can be quite volatile. After all, it was during 2001 to 2003 that the industry was mired in a downturn.
True, Lazard's growth is likely to continue. Then again, this should be the case with Goldman and Morgan as well. And these firms have broader platforms that can better withstand a downturn. Thus, if you want to participate in the boom in high-end financial services, going with Goldman or Morgan may be the better bet.Links:
Pfizer is a Motley Fool Inside Value recommendation. Johnson & Johnson is a Motley Fool Income Investor recommendation. Try any one of our investing services free for 30 days.
Fool contributor Tom Taulli does not own shares mentioned in this article.