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Poor Earnings Push Lazard Lower

LAZ's adjusted per-share profit couldn't top expectations

by 2/6/2012 12:15:26 PM
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With corporate earnings season well under way, Lazard Ltd. (LAZ - 27.50) took its turn in the earnings confessional this morning. LAZ said it swung to a fourth-quarter loss of $4.79 million, or 4 cents per share, from a year-ago profit of $99.9 million, or 77 cents per share. On an adjusted basis, earnings dropped to a penny per share from 76 cents per share. Revenue fell 23% to $469 million. The financial advisory firm's results were mixed, as Wall Street forecast a healthier profit of 37 cents per share on revenue of $459.1 million.

Following this bottom-line miss, LAZ has fallen more than 4.5%, compounding its 35.8% 52-week deficit. Currently, the stock is faltering below its downtrending 40-week moving average and the round-number $30 level, the latter of which has acted as resistance since early August 2011.

Weekly

Regardless of LAZ's poor price action, it appears that relatively few traders are betting on the stock to continue its decline. Short interest for LAZ fell more than 11.2% over the past month -- perhaps as the result of profit-taking by the shorts. These bearish bets now account for just 1.2% of the equity's float, representing a rather meager supply of sideline cash.

Elsewhere, the options arena is teeming with bullish activity, as evidenced by the stock's 10-day call/put volume ratio of 202 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This call-heavy ratio arrives two percentage points from an annual peak, implying that traders on these exchanges have rarely purchased calls over puts at a faster clip during the past year.

The stock could suffer a further setback, should the shares fail to live up to analysts expectations. According to Zacks, 71% of brokerages deem LAZ to be a "buy" or better. Moreover, Thomson Reuters places the average 12-month price target at $33.22, which represents a 26.7% premium to today's session low of $26.21.

In light of LAZ's poor technical performance, a fresh round of downgrades and/or price-target cuts, or an unwinding of bullish sentiment among speculators, could prompt additional selling pressure going forward.

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