The third-quarter results announced by Lazard (NYSE:LAZ) were refreshing. I don't say that because of the 139% year-over-year growth in net income or the 79% year-over-year boost in operating revenue -- though both were nice. I also don't say that because they weren't playing with fire like others in the financial services industry, such as Merrill Lynch (NYSE:MER) and Bear Stearns (NYSE:BSC) -- though that helped too.
What was really refreshing about the quarter was that when the firm announced first-quarter results, and then again when it announced second-quarter results, management said that much of the M&A backlog for the year was weighted toward the back half of the year. And guess what? It was.
Net income for the quarter was $84 million, compared to $117 million in the whole first half. On a per-share basis, the $0.73 that Lazard reported exceeded analysts' expectations of $0.68.
M&A advisory, Lazard's largest single revenue contributor, nearly doubled versus the third quarter of 2006. Among Lazard's completed transactions for the quarter were:
- The sale of TXU to KKR and TPG for $45 billion.
- The $16.5 billion merger of Mellon Financial and Bank of New York.
- The sale of Dollar General to KKR.
- Microsoft's $6 billion acquisition of aQuantive.
But the quarter didn't wipe out Lazard's backlog by any stretch. Similar toGreenhill (NYSE:GHL), Lazard still has a robust M&A backlog that is heavily weighted toward overseas transactions.
Back in September, I laid out a case for why Lazard looks good. Let's go ahead and stack another bullet point on there: convincing follow-through on management projections.
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