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.
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.
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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.
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.
4 Oil Stocks with Massive Upsides
Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."
Zacks Investment Research has just released an urgent special report to help you bank on this trend.
In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations.
Download your free report now to see them.
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