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Federated Investors (FHI - Free Report) reported second-quarter 2020 earnings per share of 80 cents, outpacing the Zacks Consensus Estimate of 65 cents. The figure also compares favorably with the prior-year quarter earnings of 62 cents.
Higher revenues and improved assets under management (AUM) were positives. Also, the company’s liquidity position was strong. However, elevated expenses were a major drag.
Net income was $81.2 million compared with the year-ago quarter’s $62.7 million.
Revenues Climb on Higher AUM, Costs Escalate
Second-quarter total revenues climbed 12% year over year to $360.7 million. Also, the top line surpassed the Zacks Consensus Estimate of $351.3 million. This top-line growth mainly stemmed from higher average money market and fixed-income assets.
Also, net investment advisory fees jumped 11% year over year to $245.1 million. In addition, administrative service fees grew 44% to $83.7 million. Yet, net service fees (other) climbed 26% to $31.9 million.
During the second quarter, Federated derived 44% of its revenues from money-market assets, 46% from equity and fixed-income assets, 9% from alternative/private markets and multi asset, and the remaining 1% from sources other than managed assets.
Due to an increase in the market value of investments, the company recorded non-operating income of $14 million in the quarter, as against the loss of $0.6 million reported in the prior year.
Total operating expenses escalated 11% year over year to $263.5 million. This rise was primarily due to higher distribution, systems and communications, and compensation and professional fees and other expenses.
Asset Position Steady
As of Jun 30, 2020, total AUM was a record $628.8 billion — up 25% year over year. Average managed assets were $636.9 billion, up 29%.
Federated witnessed money-market assets of $457.6 billion, up 37% from the year-ago period. Further, fixed-income assets grew 12% year over year to $73.1 billion.
Nevertheless, equity assets of $76.9 billion dropped 6% year over year. Also, multi-assets decreased 11.9% to $3.7 billion.
As of Jun 30, 2020, cash and other investments were $372.6 million and total long-term debt was $90 million compared with $340.6 million and $100 million, respectively, as of Dec 31, 2019.
During the reported quarter, the company repurchased 843,416 of Federated Hermes class B common stock for $18.1 million.
Our Viewpoint
Federated displays substantial growth potential, supported by its diverse asset and product mix as well as a solid liquidity position. In addition, acquisitions are anticipated to be beneficial for the company. Though elevated expenses pose a concern, higher revenues could aid its bottom-line performance.
Federated Hermes, Inc. Price, Consensus and EPS Surprise
Blackstone’s (BX - Free Report) second-quarter 2020 distributable earnings of 43 cents per share were in line with the Zacks Consensus Estimate. However, the figure declined 25% from the prior-year quarter. The results reflect an improving assets balance, mainly driven by inflows. However, a decline in segment revenues and higher operating expenses were the undermining factors.
Cohen & Steers’ (CNS - Free Report) adjusted earnings of 54 cents per share missed the Zacks Consensus Estimate of 55 cents during the June-end quarter. Moreover, the bottom line came in 12.9% lower than the year-ago reported figure. Results were primarily hurt by a decline in revenues, partly offset by lower expenses. In addition, despite net inflows, the company recorded a fall in its AUM balance.
Affiliated Managers Group Inc.’s (AMG - Free Report) second-quarter economic earnings of $2.74 per share surpassed the Zacks Consensus Estimate of $2.70. Nevertheless, the bottom line declined 17.7% year over year. The results reflected lower operating expenses and a robust liquidity position. However, lower revenues, fall in AUM balance and decline in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were headwinds.
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Federated (FHI) Q2 Earnings Beat Estimates, AUM Rises Y/Y
Federated Investors (FHI - Free Report) reported second-quarter 2020 earnings per share of 80 cents, outpacing the Zacks Consensus Estimate of 65 cents. The figure also compares favorably with the prior-year quarter earnings of 62 cents.
Higher revenues and improved assets under management (AUM) were positives. Also, the company’s liquidity position was strong. However, elevated expenses were a major drag.
Net income was $81.2 million compared with the year-ago quarter’s $62.7 million.
Revenues Climb on Higher AUM, Costs Escalate
Second-quarter total revenues climbed 12% year over year to $360.7 million. Also, the top line surpassed the Zacks Consensus Estimate of $351.3 million. This top-line growth mainly stemmed from higher average money market and fixed-income assets.
Also, net investment advisory fees jumped 11% year over year to $245.1 million. In addition, administrative service fees grew 44% to $83.7 million. Yet, net service fees (other) climbed 26% to $31.9 million.
During the second quarter, Federated derived 44% of its revenues from money-market assets, 46% from equity and fixed-income assets, 9% from alternative/private markets and multi asset, and the remaining 1% from sources other than managed assets.
Due to an increase in the market value of investments, the company recorded non-operating income of $14 million in the quarter, as against the loss of $0.6 million reported in the prior year.
Total operating expenses escalated 11% year over year to $263.5 million. This rise was primarily due to higher distribution, systems and communications, and compensation and professional fees and other expenses.
Asset Position Steady
As of Jun 30, 2020, total AUM was a record $628.8 billion — up 25% year over year. Average managed assets were $636.9 billion, up 29%.
Federated witnessed money-market assets of $457.6 billion, up 37% from the year-ago period. Further, fixed-income assets grew 12% year over year to $73.1 billion.
Nevertheless, equity assets of $76.9 billion dropped 6% year over year. Also, multi-assets decreased 11.9% to $3.7 billion.
As of Jun 30, 2020, cash and other investments were $372.6 million and total long-term debt was $90 million compared with $340.6 million and $100 million, respectively, as of Dec 31, 2019.
During the reported quarter, the company repurchased 843,416 of Federated Hermes class B common stock for $18.1 million.
Our Viewpoint
Federated displays substantial growth potential, supported by its diverse asset and product mix as well as a solid liquidity position. In addition, acquisitions are anticipated to be beneficial for the company. Though elevated expenses pose a concern, higher revenues could aid its bottom-line performance.
Federated Hermes, Inc. Price, Consensus and EPS Surprise
Federated Hermes, Inc. price-consensus-eps-surprise-chart | Federated Hermes, Inc. Quote
Currently, Federated carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Investment Managers
Blackstone’s (BX - Free Report) second-quarter 2020 distributable earnings of 43 cents per share were in line with the Zacks Consensus Estimate. However, the figure declined 25% from the prior-year quarter. The results reflect an improving assets balance, mainly driven by inflows. However, a decline in segment revenues and higher operating expenses were the undermining factors.
Cohen & Steers’ (CNS - Free Report) adjusted earnings of 54 cents per share missed the Zacks Consensus Estimate of 55 cents during the June-end quarter. Moreover, the bottom line came in 12.9% lower than the year-ago reported figure. Results were primarily hurt by a decline in revenues, partly offset by lower expenses. In addition, despite net inflows, the company recorded a fall in its AUM balance.
Affiliated Managers Group Inc.’s (AMG - Free Report) second-quarter economic earnings of $2.74 per share surpassed the Zacks Consensus Estimate of $2.70. Nevertheless, the bottom line declined 17.7% year over year. The results reflected lower operating expenses and a robust liquidity position. However, lower revenues, fall in AUM balance and decline in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were headwinds.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>