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Federated Hermes (FHI) Shares Fall Despite Q1 Earnings Beat
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Federated Hermes, Inc.’s (FHI - Free Report) first-quarter 2023 earnings per share of 78 cents outpaced the Zacks Consensus Estimate of 74 cents. The bottom line reflects a rise of 28% from the year-ago quarter.
Increases in net investment advisory fees, net administrative service fees and net other service fees were the major driving factors. However, a decline in equity and alternative/private market assets as well as rising expenses were the major headwinds. Probably because of these concerns, shares of the company lost 1% since its earnings released on Apr 27.
Net income was $69.6 million, up 25% from the year-ago quarter.
Revenues Improve, Operating Expenses Rise
Total revenues improved 18% year over year to $382.2 million. The top line lagged the Zacks Consensus Estimate of $386 million. The rise was mainly driven by an increase in all fee income components.
Net investment advisory fees grew 13% to $264 million. Net other service fees surged substantially to $39 million. Also, net administrative service fees grew 8% to $79.2 million.
In the reported quarter, Federated Hermes derived 47% of its total revenues from money market assets, 33% from equity, 13% from fixed-income assets, 6% from alternative/private markets and multi-asset, and the remaining 1% from sources other than managed assets.
Total operating expenses jumped 23% year over year to $297 million. The rise resulted primarily from an increase in all cost components except intangible asset related expenses.
Federated Hermes recorded a net non-operating income of $7.3 million, against net non-operating expenses of $11.7 million in the prior-year quarter.
As of Mar 31, 2023, cash and other investments were $488 million, and total long-term debt was $347.6 million compared with $521.7 million and $347.6 million, respectively, as of Dec 31, 2022.
Asset Position Increase
As of Mar 31, 2023, total managed assets were $701 billion, up 11% year over year.
Federated Hermes witnessed money-market assets of $505.8 billion, up 20% year over year. Fixed-income assets declined 5% to $87.5 billion. Equity assets of $83.6 billion fell 9% from the prior-year quarter. In addition, alternative/private market assets decreased 8% to $21.2 billion.
Average managed assets totaled $679.4 billion, up 5% year over year.
Capital Deployment Activities
The company repurchased 132,592 shares of its class B common stock for $4.7 million in the reported quarter.
Concurrently, it announced a quarterly cash dividend of 28 cents per share. representing a 4% hike from the prior payout. The dividend will be paid out on May 15 to stockholders of record as of May 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.
Federated Hermes, Inc. Price, Consensus and EPS Surprise
BlackRock, Inc.’s (BLK - Free Report) first-quarter 2023 adjusted earnings of $7.93 per share surpassed the Zacks Consensus Estimate of $7.71. However, the figure reflects a decrease of 16.7% from the year-ago quarter. Our estimate for adjusted earnings was $7.37.
BLK's results benefited from a decline in expenses. However, lower revenues and AUM balance were major headwinds.
Invesco’s (IVZ - Free Report) first-quarter 2023 adjusted earnings of 38 cents per share surpassed the Zacks Consensus Estimate of 36 cents. The bottom line, however, plunged 32.1% from the prior-year quarter. Our estimate for earnings was 31 cents.
IVZ's results benefited from a decline in operating expenses. On the other hand, lower AUM balance and long-term outflows hurt revenues.
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Federated Hermes (FHI) Shares Fall Despite Q1 Earnings Beat
Federated Hermes, Inc.’s (FHI - Free Report) first-quarter 2023 earnings per share of 78 cents outpaced the Zacks Consensus Estimate of 74 cents. The bottom line reflects a rise of 28% from the year-ago quarter.
Increases in net investment advisory fees, net administrative service fees and net other service fees were the major driving factors. However, a decline in equity and alternative/private market assets as well as rising expenses were the major headwinds. Probably because of these concerns, shares of the company lost 1% since its earnings released on Apr 27.
Net income was $69.6 million, up 25% from the year-ago quarter.
Revenues Improve, Operating Expenses Rise
Total revenues improved 18% year over year to $382.2 million. The top line lagged the Zacks Consensus Estimate of $386 million. The rise was mainly driven by an increase in all fee income components.
Net investment advisory fees grew 13% to $264 million. Net other service fees surged substantially to $39 million. Also, net administrative service fees grew 8% to $79.2 million.
In the reported quarter, Federated Hermes derived 47% of its total revenues from money market assets, 33% from equity, 13% from fixed-income assets, 6% from alternative/private markets and multi-asset, and the remaining 1% from sources other than managed assets.
Total operating expenses jumped 23% year over year to $297 million. The rise resulted primarily from an increase in all cost components except intangible asset related expenses.
Federated Hermes recorded a net non-operating income of $7.3 million, against net non-operating expenses of $11.7 million in the prior-year quarter.
As of Mar 31, 2023, cash and other investments were $488 million, and total long-term debt was $347.6 million compared with $521.7 million and $347.6 million, respectively, as of Dec 31, 2022.
Asset Position Increase
As of Mar 31, 2023, total managed assets were $701 billion, up 11% year over year.
Federated Hermes witnessed money-market assets of $505.8 billion, up 20% year over year. Fixed-income assets declined 5% to $87.5 billion. Equity assets of $83.6 billion fell 9% from the prior-year quarter. In addition, alternative/private market assets decreased 8% to $21.2 billion.
Average managed assets totaled $679.4 billion, up 5% year over year.
Capital Deployment Activities
The company repurchased 132,592 shares of its class B common stock for $4.7 million in the reported quarter.
Concurrently, it announced a quarterly cash dividend of 28 cents per share. representing a 4% hike from the prior payout. The dividend will be paid out on May 15 to stockholders of record as of May 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.
Federated Hermes, Inc. Price, Consensus and EPS Surprise
Federated Hermes, Inc. price-consensus-eps-surprise-chart | Federated Hermes, Inc. Quote
Currently, the company carries a Zacks Rank #2 (Buy). 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) first-quarter 2023 adjusted earnings of $7.93 per share surpassed the Zacks Consensus Estimate of $7.71. However, the figure reflects a decrease of 16.7% from the year-ago quarter. Our estimate for adjusted earnings was $7.37.
BLK's results benefited from a decline in expenses. However, lower revenues and AUM balance were major headwinds.
Invesco’s (IVZ - Free Report) first-quarter 2023 adjusted earnings of 38 cents per share surpassed the Zacks Consensus Estimate of 36 cents. The bottom line, however, plunged 32.1% from the prior-year quarter. Our estimate for earnings was 31 cents.
IVZ's results benefited from a decline in operating expenses. On the other hand, lower AUM balance and long-term outflows hurt revenues.