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Federated Hermes (FHI) Q2 Earnings and Revenues Top Estimates (Revised)

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Federated Hermes, Inc. (FHI - Free Report) reported second-quarter 2022 earnings per share of 74 cents (excluding the impact of net realized and unrealized losses on investments), outpacing the Zacks Consensus Estimate of 70 cents. In the same period last year, the company reported earnings per share of 56 cents.

An increase in net investment advisory fees and improved assets under management (AUM) were the driving factors. Yet, reduced net administrative service fees and equity assets were deterrents.

Net income was $57.7 million, up from the year-ago quarter’s $55.9 million.

Revenues Rise, Operating Expenses Flare Up

Total revenues improved 18% year over year to $366 million. Also, the top line surpassed the Zacks Consensus Estimate of $341.8 million.

Net investment advisory fees increased 20% year over year to $258 million. Net other service fees rose 99% to $37.7 million. However, net administrative service fees fell 10% to $70.2 million.

In the quarter, Federated Hermes derived 40% of its total revenues from money market assets, 36% from equity, 14% from fixed-income assets, 9% from alternative/private markets and multi-asset, and the remaining 1% from sources other than managed assets.

Total operating expenses rose 19% year over year to $279.7 million. The rise resulted primarily from higher distribution, and travel and related expenses.

Federated Hermes recorded net non-operating expenses of $22.6 million against a net non-operating income of $6.86 million in the prior-year quarter.

Asset Position Improves

As of Jun 30, 2021, total managed assets were $631.8 billion, up marginally sequentially. Average managed assets summed at $617.9 billion, up 4.5% year over year.

Federated Hermes witnessed money-market assets of $439.7 billion, up 5% sequentially. However, fixed-income assets declined 6% to $86.3 billion.

Equity assets of $81 billion dipped 12% sequentially. In addition, alternative/private market assets decreased 6% to $21.8 billion.

As of Jun 30, 2022, cash and other investments were $429.8 million, and total long-term debt was $397.4 million compared with $426.7 million and $223.4 million, respectively, as of Dec 31, 2021.

Capital Deployment Encourages

On Jul 28, 2022, Federated Hermes declared a quarterly dividend of 27 cents per share. The dividend will be paid out on Aug 15, 2022, to its shareholders of record as of Aug 8, 2022.

The company also purchased 2.8 million shares of its class B common stock for $89.5 million in the quarter.

Our Viewpoint

Federated Hermes 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 concerns, 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 Hermes 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

BlackRock, Inc.’s (BLK - Free Report) second-quarter 2022 adjusted earnings of $7.36 per share missed the Zacks Consensus Estimate of $8.33. The figure reflects a decrease of 30% from the year-ago quarter.

BLK’s results were adversely impacted by an unfavorable operating backdrop, leading to lower revenues and AUM balance. A modest decline in expenses was a tailwind.

SEI Investments Co.’s (SEIC - Free Report) second-quarter 2022 earnings of 81 cents per share lagged the Zacks Consensus Estimate by a penny. The bottom line reflected a decline of 12.9% from the prior-year quarter.

SEIC’s results were hurt by a rise in expenses. However, growth in revenues and an increase in the AUM balance were tailwinds.

(We are reissuing this article to correct a mistake. The original article, issued on July 28, 2022, should no longer be relied upon.)

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