Q4 2024 Federated Hermes Inc Earnings Call

Federated Hermes, Inc.’s FHI fourth-quarter 2024 adjusted earnings per share of $1.04 topped the Zacks Consensus Estimate of 96 cents. The bottom line increased 8% from the year-ago quarter.

Find the latest earnings estimates and surprises on the Zacks Earnings Calendar.

An increase in net administrative service fees is a major driving factor. The company’s total managed assets touched a record level. An increase in revenues was an added advantage.

Net income (GAAP basis) of $84.7 million rose 3% from the year-ago quarter.

In 2024, earnings of $3.23 per share topped the consensus estimate of $3.10. The metric rose from $3.40 in 2023. Net income was $268.3 million in 2024, which fell 10% from the prior year.

FHI’s Revenues & Operating Expenses

Total revenues increased 8% year over year to $424.7 million. The top line surpassed the Zacks Consensus Estimate by 1.2%.

For 2024, operating revenue was $1.63 billion, which met the Zacks Consensus Estimate. The top line rose 1% year over year.

Quarterly net investment advisory fees rose 9% year over year to $288.3 million. Our estimate for the metric was $280.9 million.

Net other service fees rose 2% year over year to $36.6 million and net administrative service fees rose 10% to $99.7 million. Our estimate for the other service fees and administrative service fees was pegged at $38.2 million and $99 million, respectively.

Total operating expenses increased 9% year over year to $314.3 million. Our expectation for the metric was $327.5 million.

Federated Hermes recorded a net non-operating income of $1.9 million compared with $14.7 million in the prior-year quarter.

Federated Hermes’ Balance Sheet Position

As of Dec. 31, 2024, cash and other investments and total long-term debt were $641 million and $348.1 million compared with $565 million and $348 million, respectively, as of Sept. 30, 2024.

FHI’s Asset Position

As of Dec. 31, 2024, total managed assets were at a record level of $829.6 billion, up 9.5% year over year. Our estimate for the metric was $815.8 billion.

FHI reported money-market assets of $630.3 billion, up 12.6% year over year. Fixed-income assets increased 3.3% to $98 billion. Our expectations for money-market and fixed-income assets were $606.3 billion and $101.1 billion, respectively.

Equity assets of $79.4 billion increased 1.1% from the prior-year quarter. Alternative/private market assets fell 8.2% to $18.9 billion. Our estimate for equity assets and alternative/private market assets was $83.9 billion and $21.4 billion, respectively.

Average managed assets totaled $805.4 billion, up 10.5% year over year. Our estimate was $804.7 billion.

Federated Hermes’ Capital Distribution Update

The company declared a quarterly cash dividend of 31 cents per share, which will be paid out on Feb. 14, 2025, to shareholders of record as of Feb. 7.

The company repurchased 552,533 shares of its class B common stock for $22.1 million in the reported quarter.

Our Viewpoint on FHI

Federated Hermes displays substantial growth potential, supported by its diverse asset and product mix, and a solid liquidity position. Though uncertain markets pose a threat, a solid asset under management 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, FHI carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performances of Other Asset Managers

Invesco’s IVZ fourth-quarter 2024 adjusted earnings of 52 cents per share surpassed the Zacks Consensus Estimate of 49 cents. Moreover, the bottom line increased 10.6% from the prior-year quarter.

The results primarily gained from a decline in adjusted expenses and higher adjusted net revenues. An increase in the AUM balance on decent inflows was a positive for IVZ.

BlackRock’s BLK fourth-quarter 2024 adjusted earnings of $11.93 per share surpassed the Zacks Consensus Estimate of $11.44. The figure reflects a rise of 23.5% from the year-ago quarter.

BLK’s results benefited from a rise in revenues. AUM witnessed robust growth and touched the $11.55-trillion mark, driven by net inflows, partially offset by market depreciation and negative forex impacts. However, higher expenses and lower non-operating income acted as headwinds.

Zacks Investment Research

Federated Hermes (FHI) came out with quarterly earnings of $1.04 per share, beating the Zacks Consensus Estimate of $0.96 per share. This compares to earnings of $0.96 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 8.33%. A quarter ago, it was expected that this one of the nation's largest managers of money market funds would post earnings of $0.92 per share when it actually produced earnings of $1.06, delivering a surprise of 15.22%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Federated Hermes, which belongs to the Zacks Financial - Investment Management industry, posted revenues of $424.68 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.19%. This compares to year-ago revenues of $391.5 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Federated Hermes shares have lost about 4% since the beginning of the year versus the S&P 500's gain of 2.7%.

What's Next for Federated Hermes?

While Federated Hermes has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Federated Hermes: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.96 on $421.42 million in revenues for the coming quarter and $4.13 on $1.74 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial - Investment Management is currently in the bottom 18% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

One other stock from the same industry, Janus Henderson Group plc (JHG), is yet to report results for the quarter ended December 2024. The results are expected to be released on January 31.

This company is expected to post quarterly earnings of $0.96 per share in its upcoming report, which represents a year-over-year change of +17.1%. The consensus EPS estimate for the quarter has been revised 3.4% lower over the last 30 days to the current level.

Janus Henderson Group plc's revenues are expected to be $690.87 million, up 21.5% from the year-ago quarter.

Zacks Investment Research

Federated Hermes reported Q4 earnings late Thursday of $1.04 per diluted share, up from $0.96 a year earlier.

Analysts polled by FactSet expected $0.97.

Revenue for the quarter ended Dec. 31 rose to $424.7 million from $391.5 million a year earlier.

Analysts surveyed by FactSet expected $419.8 million.

The company said its board maintained a quarterly dividend of $0.31 per share, payable on Feb. 14 to shareholders of record on Feb. 7.