Keefe, Bruyette & Woods Upgrades Lazard And JMP Group

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Keefe, Bruyette & Woods upgraded Lazard Ltd LAZ and JMP Group Inc. JMP Thursday on an improved 2015 outlook.

Analyst Joel Jeffery commented that “that each firm's modest current P/E multiple and solid EPS growth outlook offer significant price appreciation over the next 12 months.”

Lazard was upgraded from Market Perform to Outperform and its price target was raised from $57 to $61.

Jeffery believed that “LAZ represents a solid near-term and long-term opportunity with relatively modest downside risk. Given our expectation for a 20 percent improvement in M&A activity in 2015, the strength of the firm’s pipeline, its improved operating leverage, and its discounted valuation to peers, we believe that LAZ represents the most attractive stock among the M&A advisory firms with an estimated total return in the next 12 months of 24 percent.”

“While we believe that stock will outperform its peers, we would note that LAZ’s results are correlated with the performance of the global markets and global economies, so there could be some volatility in the near-term share price given the relative weakness in European economy,” cautioned Jeffery.

JMP Group was upgraded from Market Perform to Outperform and its price target was raised from $7.50 to $9.15.

Jeffery upgraded JMP “primarily on valuation as the stock is currently trading at 7.8X our 2015 EPS estimate, which represents a 22 percent discount to the firm’s three-year average.”

“The firm recently approved a conversion of its corporate structure to a limited liability company from a C-Corp. which we estimate will reduce it’s tax rate from 38 percent to 25 percent, which we estimate will increase 2015 EPS by 20 percent,” according to the analyst note.

“Additionally, the firm intents to increase its payout ratio to 50 percent-70 percent from 30 percent-35 percent. Based on the current share price, the dividend yield would increase from 3.8 percent to 7.7 percent as a result of the increased earnings and higher payout ratio. Based on our $9.15 price target and our estimated 7.7 percent dividend yield that total return over the next twelve months will be 31 percent,” according to Jeffery.

Lazard closed Thursday at $49.79, down 0.95 percent.

JMP Group closed at $7.38, up 0.14 percent.

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Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsJoel JefferyKeefe Bruyette & Woods
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