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Federated (FHI) Q2 Earnings Meet Estimates, AUM Rises Y/Y

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Federated Hermes (FHI - Free Report) reported second-quarter 2021 earnings per share of 67 cents, in line with the Zacks Consensus Estimate. The figure, however, compares unfavorably with the prior-year quarter earnings of 80 cents.

Second quarter earnings per share of 67 cents excludes non cash tax expense of 11 cents per share.

Lower expenses and improved assets under management (AUM) were positives. Also, the company’s liquidity position was strong. However, voluntary fee waivers and lower revenues were major drags.

Net income was $55.89 million compared with the year-ago quarter’s $81.2 million.

Revenues Fall, Costs Decline, AUM Up

The second-quarter total revenues declined 14% year over year to $311.04 million. Moreover, the top line missed the Zacks Consensus Estimate by 2.49%. This downside mainly stemmed from voluntary fee waivers associated with certain money market funds, in order for those funds to maintain positive or zero net yields.

Also, net investment advisory fees dropped 13% year over year to $214.3 million. In addition, administrative service fees fell 7% to $77.75 million. Net service fees (other) plummeted 40% to $19 million.

During the June-end quarter, Federated derived 16% of its revenues from money-market assets, 55% from equity, 19% from fixed-income assets, 9% from alternative/private markets and multi asset, and the remaining 1% from sources other than managed assets.

The company recorded non-operating income of $6.86 million in the reported quarter, down 51% from the $14 million earned in the prior-year quarter.

Total operating expenses slipped 13% year over year to $229.2 million. Lower distribution expenses, majorly resulting from higher voluntary yield-related fee waivers, aided this decline.

Asset Position Steady

As of Jun 30, 2021, total AUM came in at a record $645.8 billion, up 3% year over year. Average managed assets summed $639.7 billion, up marginally year over year.

Federated witnessed money-market assets of $429.8 billion, down 6% from the year-ago period. Further, fixed-income assets were up 24% to $90.8 billion.

Record equity assets of $100.5 billion rose 31%, year over year. In addition, alternative market assets increased 20% to $21 billion.

As of Jun 30, 2021, cash and other investments were $424.2 million and total long-term debt was $65 million compared with $438.7 million and $75 million, respectively, as of Dec 31, 2020.

Capital Deployment Update

During the second quarter, Federated repurchased more than 993,100 million shares of Federated class B common stock for $31.8 million.

Our Viewpoint

Federated displays substantial growth potential, supported by its diverse asset and product mix, as well as a solid liquidity position. Apart from this, acquisitions are anticipated to be beneficial for the company. Though uncertain markets pose a concern, rising assets and prudent cost management will likely boost the bottom line.

Federated Hermes, Inc. Price, Consensus and EPS Surprise

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

BlackRock, Inc.’s (BLK - Free Report) second-quarter 2021 adjusted earnings of $10.03 per share outpaced the Zacks Consensus Estimate of $9.24. The reported figure reflected a rise of 27.8 % from the year-ago quarter’s number.

Blackstone’s (BX - Free Report) second-quarter 2021 distributable earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 80 cents. The figure marked a 90.7% surge from the prior-year period.

SEI Investments Co.’s (SEIC - Free Report) second-quarter 2021 earnings of 93 cents per share topped the Zacks Consensus Estimate by a penny. The bottom line displayed 37% growth from the prior-year quarter.