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Federated Hermes (FHI) Q2 Earnings and Revenues Beat Estimates
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Federated Hermes, Inc.’s (FHI - Free Report) second-quarter 2023 earnings per share of 81 cents outpaced the Zacks Consensus Estimate by a penny. The bottom line reflects a rise of 26.6% from the year-ago quarter.
Increases in net investment advisory fees and net administrative service were the major driving factors. However, a decline in equity and alternative/private market assets, as well as rising expenses, acted as dampeners.
Net income was $72.2 million, up 25.2% from the year-ago quarter. Our estimate for the metric was $65.2.
Revenues Improve, Operating Expenses Rise
Total revenues improved 18.4% year over year to $433.2 million. The top line beat the Zacks Consensus Estimate of $392.7 million. The rise was driven by an increase in net investment advisory fees and net administrative service fees.
Net investment advisory fees grew 20.3% to $310.3 million. While net other service fees decreased marginally to $37.7 million, net administrative service fees grew 21.4% to $85.2 million.
In the reported quarter, Federated Hermes derived 45% of its total revenues from money market assets, 28% from equity, 11% from fixed-income assets, 15% from alternative/private markets and multi-asset, and the remaining 1% from sources other than managed assets.
Total operating expenses jumped 22.3% year over year to $334.8 million. The rise resulted primarily from an increase in all cost components. Our expectation for the metric was $301 million, but a substantial increase in compensation and related expenses led the company to post higher numbers.
Federated Hermes recorded a net non-operating income of $2.2 million against net non-operating expenses of $22.7 million in the prior-year quarter. Our expectation for the same was $2.9 million.
As of Jun 30, 2023, cash and other investments and total long-term debt were $520.8 million and $347.7 million compared with $488 million and $347.6 million, respectively, as of Mar 31, 2022.
Asset Position Increase
As of Jun 30, 2023, total managed assets were $704 billion, up 11.4% year over year.
Federated Hermes witnessed money-market assets of $509 billion, up 15.8% year over year. Fixed-income assets declined 1.4% to $87.4 billion. Equity assets of $83 billion fell 2.5% from the prior-year quarter. However, alternative/private market assets decreased marginally to $21.6 billion. Our expectations for money-market assets, fixed-income assets, equity assets and alternative/private market assets were $485.6 billion, $90.3 billion, $83.7 billion, and $21.9 billion, respectively.
Average managed assets totaled $705.3 billion, up 14.1% year over year.
Capital Deployment Activities
The company repurchased 1,236,199 shares of its class B common stock for $43.4 million in the reported quarter.
It also announced a quarterly cash dividend of 28 cents per share. The dividend will be paid out on Aug 15 to stockholders of record as of Aug 8.
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.
BlackRock, Inc.’s (BLK - Free Report) second-quarter 2023 adjusted earnings of $9.28 per share surpassed the Zacks Consensus Estimate of $8.47. The figure reflects an increase of 26% from the year-ago quarter.
BLK's results benefited from a decline in expenses. However, lower revenues acted as a headwind.
Invesco’s (IVZ - Free Report) second-quarter 2023 adjusted earnings of 31 cents per share lagged the Zacks Consensus Estimate of 40 cents. The bottom line plunged 20.5% from the prior-year quarter.
Results have been hurt by a rise in operating expenses and lower revenues. Nevertheless, an increase in the AUM balance aided the results to some extent.
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Federated Hermes (FHI) Q2 Earnings and Revenues Beat Estimates
Federated Hermes, Inc.’s (FHI - Free Report) second-quarter 2023 earnings per share of 81 cents outpaced the Zacks Consensus Estimate by a penny. The bottom line reflects a rise of 26.6% from the year-ago quarter.
Increases in net investment advisory fees and net administrative service were the major driving factors. However, a decline in equity and alternative/private market assets, as well as rising expenses, acted as dampeners.
Net income was $72.2 million, up 25.2% from the year-ago quarter. Our estimate for the metric was $65.2.
Revenues Improve, Operating Expenses Rise
Total revenues improved 18.4% year over year to $433.2 million. The top line beat the Zacks Consensus Estimate of $392.7 million. The rise was driven by an increase in net investment advisory fees and net administrative service fees.
Net investment advisory fees grew 20.3% to $310.3 million. While net other service fees decreased marginally to $37.7 million, net administrative service fees grew 21.4% to $85.2 million.
In the reported quarter, Federated Hermes derived 45% of its total revenues from money market assets, 28% from equity, 11% from fixed-income assets, 15% from alternative/private markets and multi-asset, and the remaining 1% from sources other than managed assets.
Total operating expenses jumped 22.3% year over year to $334.8 million. The rise resulted primarily from an increase in all cost components. Our expectation for the metric was $301 million, but a substantial increase in compensation and related expenses led the company to post higher numbers.
Federated Hermes recorded a net non-operating income of $2.2 million against net non-operating expenses of $22.7 million in the prior-year quarter. Our expectation for the same was $2.9 million.
As of Jun 30, 2023, cash and other investments and total long-term debt were $520.8 million and $347.7 million compared with $488 million and $347.6 million, respectively, as of Mar 31, 2022.
Asset Position Increase
As of Jun 30, 2023, total managed assets were $704 billion, up 11.4% year over year.
Federated Hermes witnessed money-market assets of $509 billion, up 15.8% year over year. Fixed-income assets declined 1.4% to $87.4 billion. Equity assets of $83 billion fell 2.5% from the prior-year quarter. However, alternative/private market assets decreased marginally to $21.6 billion. Our expectations for money-market assets, fixed-income assets, equity assets and alternative/private market assets were $485.6 billion, $90.3 billion, $83.7 billion, and $21.9 billion, respectively.
Average managed assets totaled $705.3 billion, up 14.1% year over year.
Capital Deployment Activities
The company repurchased 1,236,199 shares of its class B common stock for $43.4 million in the reported quarter.
It also announced a quarterly cash dividend of 28 cents per share. The dividend will be paid out on Aug 15 to stockholders of record as of Aug 8.
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.
Federated Hermes, Inc. Price, Consensus and EPS Surprise
Federated Hermes, Inc. price-consensus-eps-surprise-chart | Federated Hermes, Inc. Quote
Performance of Other Asset Managers
BlackRock, Inc.’s (BLK - Free Report) second-quarter 2023 adjusted earnings of $9.28 per share surpassed the Zacks Consensus Estimate of $8.47. The figure reflects an increase of 26% from the year-ago quarter.
BLK's results benefited from a decline in expenses. However, lower revenues acted as a headwind.
Invesco’s (IVZ - Free Report) second-quarter 2023 adjusted earnings of 31 cents per share lagged the Zacks Consensus Estimate of 40 cents. The bottom line plunged 20.5% from the prior-year quarter.
Results have been hurt by a rise in operating expenses and lower revenues. Nevertheless, an increase in the AUM balance aided the results to some extent.