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Federated (FHI) Q1 Earnings Miss Estimates, AUM Increases

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Federated Hermes (FHI - Free Report) reported first-quarter 2022 earnings per share of 61 cents, missing the Zacks Consensus Estimate of 79 cents. Further, the figure compares unfavorably with the prior-year quarter’s earnings of 75 cents.

Controlled operating expenses and improved assets under management (AUM) were driving factors. Also, FHI’s liquidity position was strong. Yet, reduced net investment advisory fees and net service fees were deterrents.

Net income was $55.9 million, down from the year-ago quarter’s $74.5 million.

Revenues Fall, Operating Expenses Decline, AUM Rises

Total revenues declined 5% year over year to $324.8 million. The year-over-year downside stemmed from a decrease in all fees. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $322.7.

Net investment advisory fees dropped 6% year over year to $233 million. In addition, administrative service fees fell 1% to $73.5 million. Net service fees (other) declined 5% to $18.3 million.

During the quarter, Federated derived 27% of its revenues from money market assets, 45% from equity, 18% from fixed-income assets, 9% from alternative/private markets and multi-asset, and the remaining 1% from sources other than managed assets.

Federated recorded net non-operating expenses of $11.7 million against a net non-operating income of $1.9 million earned in the prior-year quarter.

Total operating expenses slipped 1% year over year to $240.8 million. The decline resulted primarily on decreased compensation and a related expense.

As of Mar 31, 2021, total AUM came in at a record $631.1 billion, up 1% year over year. Average managed assets summed $647.2 billion, up 5% year over year.

Asset Position Improves

Federated witnessed money-market assets of $420.6 billion, up from $419.1 in the year-ago period. Further, fixed-income assets were up 7% to $92.1 billion.

Equity assets of $91.7 billion rose 5% year over year. In addition, alternative/private market assets increased 1% to $23.1 billion.

As of Mar 31, 2022, cash and other investments were $457.5 million and a total long-term debt was $397.4 million compared with $426.7 million and $223.4 million, respectively, as of Dec 31, 2021.

Dividend Update

During the first quarter, Federated declared a quarterly dividend of 27 cents per share. The dividend will be paid out on May 13, 2022 to its shareholders of record as of May 6, 2022.

Our Viewpoint

Federated displays substantial growth potential, supported by its diverse asset and product mix as well as a solid liquidity position. Acquisitions are also anticipated to be beneficial for FHI. Though uncertain markets pose a concern, higher AUM and prudent cost management will likely aid its bottom-line performance.

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 Other Banks

UMB Financial (UMBF - Free Report) reported first-quarter 2022 net operating income per share of $2.17, which surpassed the Zacks Consensus Estimate of $1.65. The bottom line also compares favorably with the prior-year quarter’s earnings of $1.91.

UMBF’s results were supported by higher revenues, driven by an increase in net interest income (NII) and fee income. A solid balance sheet position was another positive. Increased expenses and deteriorating credit quality were headwinds. Capital ratios witnessed a decline.

Northern Trust Corporation (NTRS - Free Report) delivered an earnings beat of 6.63% for first-quarter 2022. Earnings per share of $1.77 surpassed the Zacks Consensus Estimate of $1.66. Moreover, the bottom line improved 4% year over year.

Higher revenues, aided by a rise in fee income and NII, were a driving factor for NTRS. Most credit metrics also marked significant improvements. However, a rising expense base and weak capital ratios were headwinds.

UBS Group AG (UBS - Free Report) reported first-quarter 2022 net profit attributable to shareholders of $2.1 billion, up 17.1% from the prior-year quarter’s level.

UBS’ performance was driven by a 10% rise in NII from the prior-year quarter’s level. A solid capital position was a tailwind.