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Federated Hermes (FHI) Q3 Earnings and Revenues Top Estimates
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Federated Hermes, Inc.’s (FHI - Free Report) third-quarter 2023 earnings per share of 86 cents outpaced the Zacks Consensus Estimate of 82 cents. The bottom line reflects a rise of 10.3% from the year-ago quarter.
Increases in net investment advisory fees and net administrative service fees were the major driving factors. However, reduced net other service fees and elevated expense levels were the headwinds.
Net income was $72 million, up 8% from the year-ago quarter. Our estimate for the metric was $72.7 million.
Revenues Improve, Operating Expenses Rise
Total revenues improved 5.6% year over year to $402.7 million. The top line beat the Zacks Consensus Estimate of $400.9 million. The rise was driven by an increase in net investment advisory fees and net administrative service fees.
Net investment advisory fees grew 5% to $276.8 million. While net other service fees decreased 10.9% to $37.9 million, net administrative service fees increased 17.3% to $88 million.
In the reported quarter, Federated Hermes derived 46% of its total revenues from money market assets, 31% from equity, 12% from fixed-income assets, 10% from alternative/private markets and multi-asset and the remaining 1% from sources other than managed assets.
Total operating expenses jumped 5.9% year over year to $301.2 million. The rise resulted primarily from an increase in almost all the cost components of operating expenses, except distribution, and advertising and promotional. Our expectation for the metric was $305 million.
Federated Hermes recorded net non-operating expenses of $0.4 million compared with net non-operating expenses of $7.6 million in the prior-year quarter. Our expectation for the same was $3.6 million.
As of Sep 30, 2023, cash and other investments and total long-term debt were $554.4 million and $347.8 million compared with $521.8 million and $347.6 million, respectively, as of Dec 31, 2022.
Asset Position Increase
As of Sep 30, 2023, total managed assets were $715.2 billion, up 14.5% year over year.
Federated Hermes witnessed money-market assets of $525.1 billion, up 20% year over year. Fixed-income assets increased 5.2% to $89.7 billion. Equity assets of $77.3 billion rose 3.5% from the prior-year quarter. Moreover, alternative/private market assets increased marginally to $20.3 billion. Our expectations for money-market assets, fixed-income assets, equity assets and alternative/private market assets were $493.8 billion, $88.8 billion, $82.5 billion and $21.4 billion, respectively.
Average managed assets totaled $711.2 billion, up 12.6% year over year.
Share Repurchase Update
The company repurchased 2,046,790 shares of its class B common stock for $68.9 million in the reported quarter.
Its board of directors also approved an additional share buyback program, which allows the repurchase of up to an additional 5 million shares of its Class B common stock.
Our Viewpoint
Federated Hermes displays substantial growth potential, supported by its diverse asset and product mix and a solid liquidity position. Though uncertain markets and mounting costs pose concerns, a solid asset under management (AUM) balance will likely aid its financials.
Federated Hermes, Inc. Price, Consensus and EPS Surprise
Blackstone’s (BX - Free Report) third-quarter 2023 distributable earnings of 94 cents per share lagged the Zacks Consensus Estimate of 99 cents. The figure also reflects a decline of 11% from the prior-year quarter.
Results of BX were adversely impacted by lower segment revenues and a rise in GAAP expenses. On the other hand, an increase in the AUM balance, mainly driven by decent inflows, was the tailwind.
Invesco’s (IVZ - Free Report) third-quarter 2023 adjusted earnings of 35 cents per share lagged the Zacks Consensus Estimate of 36 cents. The bottom line, however, rose 2.9% from the prior-year quarter.
Results were hurt by a rise in operating expenses and lower revenues. Nevertheless, an increase in AUM balance on decent inflows aided IVZ’s results to some extent.
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Federated Hermes (FHI) Q3 Earnings and Revenues Top Estimates
Federated Hermes, Inc.’s (FHI - Free Report) third-quarter 2023 earnings per share of 86 cents outpaced the Zacks Consensus Estimate of 82 cents. The bottom line reflects a rise of 10.3% from the year-ago quarter.
Increases in net investment advisory fees and net administrative service fees were the major driving factors. However, reduced net other service fees and elevated expense levels were the headwinds.
Net income was $72 million, up 8% from the year-ago quarter. Our estimate for the metric was $72.7 million.
Revenues Improve, Operating Expenses Rise
Total revenues improved 5.6% year over year to $402.7 million. The top line beat the Zacks Consensus Estimate of $400.9 million. The rise was driven by an increase in net investment advisory fees and net administrative service fees.
Net investment advisory fees grew 5% to $276.8 million. While net other service fees decreased 10.9% to $37.9 million, net administrative service fees increased 17.3% to $88 million.
In the reported quarter, Federated Hermes derived 46% of its total revenues from money market assets, 31% from equity, 12% from fixed-income assets, 10% from alternative/private markets and multi-asset and the remaining 1% from sources other than managed assets.
Total operating expenses jumped 5.9% year over year to $301.2 million. The rise resulted primarily from an increase in almost all the cost components of operating expenses, except distribution, and advertising and promotional. Our expectation for the metric was $305 million.
Federated Hermes recorded net non-operating expenses of $0.4 million compared with net non-operating expenses of $7.6 million in the prior-year quarter. Our expectation for the same was $3.6 million.
As of Sep 30, 2023, cash and other investments and total long-term debt were $554.4 million and $347.8 million compared with $521.8 million and $347.6 million, respectively, as of Dec 31, 2022.
Asset Position Increase
As of Sep 30, 2023, total managed assets were $715.2 billion, up 14.5% year over year.
Federated Hermes witnessed money-market assets of $525.1 billion, up 20% year over year. Fixed-income assets increased 5.2% to $89.7 billion. Equity assets of $77.3 billion rose 3.5% from the prior-year quarter. Moreover, alternative/private market assets increased marginally to $20.3 billion. Our expectations for money-market assets, fixed-income assets, equity assets and alternative/private market assets were $493.8 billion, $88.8 billion, $82.5 billion and $21.4 billion, respectively.
Average managed assets totaled $711.2 billion, up 12.6% year over year.
Share Repurchase Update
The company repurchased 2,046,790 shares of its class B common stock for $68.9 million in the reported quarter.
Its board of directors also approved an additional share buyback program, which allows the repurchase of up to an additional 5 million shares of its Class B common stock.
Our Viewpoint
Federated Hermes displays substantial growth potential, supported by its diverse asset and product mix and a solid liquidity position. Though uncertain markets and mounting costs pose concerns, a solid asset under management (AUM) balance will likely aid its financials.
Federated Hermes, Inc. Price, Consensus and EPS Surprise
Federated Hermes, Inc. price-consensus-eps-surprise-chart | Federated Hermes, Inc. Quote
Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Asset Managers
Blackstone’s (BX - Free Report) third-quarter 2023 distributable earnings of 94 cents per share lagged the Zacks Consensus Estimate of 99 cents. The figure also reflects a decline of 11% from the prior-year quarter.
Results of BX were adversely impacted by lower segment revenues and a rise in GAAP expenses. On the other hand, an increase in the AUM balance, mainly driven by decent inflows, was the tailwind.
Invesco’s (IVZ - Free Report) third-quarter 2023 adjusted earnings of 35 cents per share lagged the Zacks Consensus Estimate of 36 cents. The bottom line, however, rose 2.9% from the prior-year quarter.
Results were hurt by a rise in operating expenses and lower revenues. Nevertheless, an increase in AUM balance on decent inflows aided IVZ’s results to some extent.