February 5, 2019 / 12:10 PM / 9 months ago

Lazard trounces profit estimates on strength in M&A advisory

(Reuters) - Financial adviser Lazard Ltd topped analysts’ estimates for quarterly profit on Tuesday, buoyed by strong performance in its M&A advisory business, and said it expected further improvement in deal-making activity in 2019.

Lazard, seen as a bellwether for mergers and acquisitions, said revenue from its advisory business rose a better-than-expected 19 percent in the fourth quarter, helped largely by M&As.

“There has been an improvement in M&A from the third and fourth quarters, when there was a bit of concern about the outlook for markets, as well as the economy,” Chief Executive Officer Ken Jacobs said in an interview.

U.S. market volatility spiked in the last month of 2018 due to uncertainty around global growth, the U.S.-China trade war and Brexit, hitting sentiment and prompting companies to delay striking big deals, as well as initial public offerings over valuation concerns.

“Valuations are probably more reasonable than they were last year. Credit spreads have not widened a lot, so financing is still widely available in investment and non-investment grade factors,” Jacobs said.

The Bermuda-headquartered advisory firm had a market share of 25.1 percent for completed deals globally in the latest reported quarter, according to Refinitiv data.

Some of the big deals Lazard advised during 2018 included Aetna’s $78 billion sale to CVS Health and Express Scripts’ $67 billion sale to Cigna, the company said.

While M&A remained strong in the quarter, the company’s asset management business saw outflows of $3.2 billion due to the higher market volatility and resulted in a 17 percent drop in revenue in the unit.

The company, which has been trying to grow the asset management business to diversify its revenue streams, said total revenue was largely unchanged at $684.5 million in the fourth quarter.

Lazard's adjusted net income fell 20 percent to $118.9 million, or 94 cents per share, in the fourth quarter ended Dec. 31.(reut.rs/2D6ZPMV)

Analysts on average were expecting a profit of 92 cents per share, according to IBES data from Refinitiv.

The company’s shares were up 1.07 percent at $41.61 in morning trading.

Reporting By Aparajita Saxena in Bengaluru; Editing by Sriraj Kalluvila

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