Federated Hermes (FHI, Financial) has announced its financial results for the first quarter of 2025, reporting revenue of $423.54 million, slightly ahead of the analysts' consensus estimate of $422.73 million. This marks a solid start to the year for the company, driven by a sustained increase in assets under management (AUM).
For the tenth consecutive quarter, Federated Hermes has achieved record levels of AUM. This growth is attributed to robust inflows into the firm's money market funds and separate accounts, as investors continue to seek stability amidst market fluctuations. The preference for these funds is largely due to their competitive yield advantage compared to traditional bank deposit accounts and certain direct market securities during this period.
Additionally, there is notable interest in Federated Hermes' MDT products, particularly the MDT Market Neutral Fund. This fund is designed to deliver long-term capital appreciation while minimizing exposure to general stock market risks. The company’s MDT strategies have historically provided opportunities for outperformance by evaluating companies using a systematic approach that incorporates both fundamental and technical assessments.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 6 analysts, the average target price for Federated Hermes Inc (FHI, Financial) is $38.67 with a high estimate of $42.00 and a low estimate of $34.00. The average target implies an upside of 0.96% from the current price of $38.30. More detailed estimate data can be found on the Federated Hermes Inc (FHI) Forecast page.
Based on the consensus recommendation from 8 brokerage firms, Federated Hermes Inc's (FHI, Financial) average brokerage recommendation is currently 2.9, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Federated Hermes Inc (FHI, Financial) in one year is $45.89, suggesting a upside of 19.82% from the current price of $38.3. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Federated Hermes Inc (FHI) Summary page.
FHI Key Business Developments
Release Date: January 31, 2025
- Assets Under Management (AUM): Record AUM of $830 billion, with money market assets at $630 billion.
- Equity Assets: Decreased by $4.2 billion from Q3 due to net redemptions and FX impact.
- MDT Strategies: Assets reached $13 billion, up 70% from year-end 2023, with $1.2 billion in net sales in Q4.
- Fixed Income Assets: Decreased by $2.1 billion in Q4 due to market valuations and net redemptions.
- Money Market Assets: Reached a record high of $462 billion in funds, with total money market assets at $630 billion.
- Revenue: Increased by $16.2 million or 4% from the prior quarter.
- Operating Expenses: Increased by $17.5 million from Q3, mainly due to FX-related expenses.
- Cash and Investments: $641 million at year-end, with $588 million excluding noncontrolling interest.
- Tax Rate: Q4 tax rate was 25.4%, expected to be 26% to 28% for 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Federated Hermes Inc (FHI, Financial) ended 2024 with record assets under management of $830 billion, driven by record money market assets of $630 billion.
- The MDT fundamental quant strategies saw strong performance, with assets reaching $13 billion at year-end, up 70% from the previous year.
- The company successfully launched four active ETFs and a new collective fund, accumulating approximately $424 million in assets.
- Money market fund assets reached a record high of $462 billion, with total money market assets increasing by about $37 billion in Q4.
- Federated Hermes Inc (FHI) has a positive outlook for money market strategies due to favorable short-term interest rate conditions, supporting cash as an attractive asset class.
Negative Points
- Equity assets decreased by $4.2 billion in Q4 due to net redemptions and FX impacts.
- Fixed income assets decreased by about $2.1 billion in Q4, primarily due to market valuations and net redemptions.
- Alternative private markets assets decreased by $1.8 billion in Q4, mainly due to FX rates and net redemptions.
- Q4 operating expenses increased by $17.5 million from Q3, largely due to FX-related expense increases.
- The company's market share in money market mutual funds slightly decreased from 7.32% to 7.22% at the end of 2024.
