Core Viewpoint - Federated Hermes, Inc. reported strong fourth-quarter 2024 earnings, with adjusted earnings per share of $1.04, exceeding the Zacks Consensus Estimate of 96 cents, marking an 8% increase from the previous year [1][2] Financial Performance - The company's net income on a GAAP basis was $84.7 million, reflecting a 3% increase year over year [2] - Total revenues for the quarter rose 8% year over year to $424.7 million, surpassing the Zacks Consensus Estimate by 1.2% [4] - For the full year 2024, operating revenue was $1.63 billion, meeting the Zacks Consensus Estimate, with a 1% year-over-year increase [4] - Quarterly net investment advisory fees increased by 9% year over year to $288.3 million, exceeding estimates [4] - Total operating expenses rose 9% year over year to $314.3 million, which was below expectations [5] Asset Management - As of December 31, 2024, total managed assets reached a record level of $829.6 billion, up 9.5% year over year, exceeding estimates [7] - Money-market assets increased by 12.6% year over year to $630.3 billion, while fixed-income assets rose by 3.3% to $98 billion [7] - Equity assets were reported at $79.4 billion, a 1.1% increase from the prior year, while alternative/private market assets fell by 8.2% to $18.9 billion [8] - Average managed assets totaled $805.4 billion, reflecting a 10.5% year-over-year increase [8] Capital Distribution - The company declared a quarterly cash dividend of 31 cents per share, payable on February 14, 2025 [10] - In the reported quarter, Federated Hermes repurchased 552,533 shares of its class B common stock for $22.1 million [10] Market Position - Federated Hermes demonstrates substantial growth potential, supported by a diverse asset and product mix and a solid liquidity position [11]

Core Insights - Federated Hermes reported revenue of $424.68 million for the quarter ended December 2024, reflecting an 8.5% increase year-over-year and surpassing the Zacks Consensus Estimate of $419.71 million by 1.19% [1] - The company's EPS for the quarter was $1.04, up from $0.96 in the same quarter last year, resulting in an EPS surprise of 8.33% compared to the consensus estimate of $0.96 [1] Financial Performance Metrics - Managed Assets in Alternative/Private Markets were reported at $18.86 billion, below the average estimate of $21.19 billion [4] - Managed Assets in Multi-Asset were reported at $2.88 billion, slightly below the average estimate of $2.96 billion [4] - Money Market Managed Assets were reported at $630.35 billion, exceeding the average estimate of $618.29 billion [4] - Long-term Fund Assets in Alternative/Private Markets were reported at $11.50 billion, below the average estimate of $12.89 billion [4] - Long-term Fund Assets in Multi-Asset were reported at $2.76 billion, below the average estimate of $2.83 billion [4] - Long-term Fixed-Income Managed Assets were reported at $98.06 billion, below the average estimate of $100.46 billion [4] - Separate Accounts in Alternative/Private Markets were reported at $7.36 billion, below the average estimate of $8.30 billion [4] - Separate Accounts in Multi-Asset were reported at $119 million, below the average estimate of $139.35 million [4] - Money Market Separate Accounts were reported at $168.63 billion, exceeding the average estimate of $164.62 billion [4] Revenue Breakdown - Administrative service fees, net-affiliates were reported at $99.71 million, above the average estimate of $98.52 million, representing a year-over-year change of 9.7% [4] - Other service fees, net were reported at $36.64 million, below the average estimate of $38.69 million, with a year-over-year change of 2.1% [4] - Investment advisory fees, net were reported at $288.33 million, exceeding the average estimate of $279.62 million, reflecting an 8.9% increase year-over-year [4] Stock Performance - Shares of Federated Hermes have returned -4% over the past month, while the Zacks S&P 500 composite has increased by 1.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Earnings Performance - Federated Hermes reported quarterly earnings of $1 04 per share, beating the Zacks Consensus Estimate of $0 96 per share, representing an 8 33% earnings surprise [1][2] - The company's earnings per share (EPS) increased from $0 96 a year ago, with figures adjusted for non-recurring items [1] - Over the last four quarters, the company has surpassed consensus EPS estimates three times [2] Revenue Performance - Federated Hermes posted revenues of $424 68 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1 19% [3] - This represents an increase from year-ago revenues of $391 5 million [3] - The company has topped consensus revenue estimates three times over the last four quarters [3] Stock Performance and Market Comparison - Federated Hermes shares have lost about 4% since the beginning of the year, compared to the S&P 500's gain of 2 7% [4] - The sustainability of the stock's immediate price movement will depend on management's commentary on the earnings call [4] Earnings Outlook and Estimate Revisions - 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 [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions [6] - The estimate revisions trend for Federated Hermes is mixed, translating into a Zacks Rank 3 (Hold) [7] Industry Context - Federated Hermes belongs to the Zacks Financial - Investment Management industry, which is currently in the bottom 18% of the 250 plus Zacks industries [9] - The top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [9] Peer Comparison - Janus Henderson Group plc (JHG), another company in the same industry, is expected to report quarterly earnings of $0 96 per share, representing a year-over-year change of +17 1% [10] - Janus Henderson Group plc's revenues are expected to be $690 87 million, up 21 5% from the year-ago quarter [11] - The consensus EPS estimate for Janus Henderson Group plc has been revised 3 4% lower over the last 30 days [10]

Earnings Performance - Q4 2024 earnings per diluted share (EPS) was $1.04, up from $0.96 in Q4 2023, with net income of $84.7 million compared to $82.2 million in the same quarter last year[1] - Full-year 2024 EPS was $3.23, down from $3.40 in 2023, with net income of $268.3 million compared to $299.0 million in 2023[1] - Basic and diluted earnings per share for Q4 2024 were $1.04, an 8% increase from $0.96 in Q4 2023[20] - Full-year 2024 net income decreased by 10% to $268,314,000 compared to $298,980,000 in 2023[21] Revenue and Expenses - Revenue for Q4 2024 increased by $33.2 million or 8%, primarily due to higher average money market and equity assets[8] - Q4 2024 total revenue increased by 8% to $424,683,000 compared to Q4 2023[20] - Investment advisory fees for Q4 2024 rose by 9% to $288,329,000 from $264,693,000 in Q4 2023[20] - Full-year 2024 total revenue was $1,632,093,000, a 1% increase from $1,609,574,000 in 2023[21] - Total operating expenses for Q4 2024 increased by 9% to $314,256,000 compared to $288,927,000 in Q4 2023[20] - Operating expenses increased by $25.3 million or 9% in Q4 2024, mainly due to higher compensation and distribution expenses[9] Assets Management - Total assets under management reached a record $829.6 billion at Dec. 31, 2024, up $72.0 billion or 10% from $757.6 billion at Dec. 31, 2023[2] - Average managed assets for Q4 2024 were $804.4 billion, up $76.4 billion or 10% from $728.0 billion in Q4 2023[2] - Total Managed Assets increased to $829,578 million as of December 31, 2024, up from $757,622 million a year earlier, representing a growth of 9.5%[31] - Total Fund Assets at the end of Q4 2024 were $565,287 million, compared to $507,696 million at the end of Q4 2023, reflecting a year-over-year increase of 11.3%[31] Market Performance - The company experienced net redemptions of $4,386 million in Q4 2024, compared to net redemptions of $415 million in Q3 2024[25] - Market losses in Q4 2024 amounted to $(1,148) million, contrasting with market gains of $9,914 million in Q3 2024[23] - The company reported a market loss of $(1,176) million in Q4 2024, contrasting with a market gain of $5,736 million in Q4 2023[31] Asset Composition - Money market assets were a record $630.3 billion at Dec. 31, 2024, up $70.3 billion or 13% from $560.0 billion at Dec. 31, 2023[7] - Fixed-income assets were $98.1 billion at Dec. 31, 2024, up $3.2 billion or 3% from $94.9 billion at Dec. 31, 2023[5] - Alternative/private markets assets decreased to $18.9 billion at Dec. 31, 2024, down $1.7 billion or 8% from $20.6 billion at Dec. 31, 2023[6] - The equity asset class managed assets totaled $79,423 million at the end of Q4 2024, down from $79,291 million at the end of Q4 2023, a slight decrease of 0.2%[31] - Fixed-income managed assets rose to $98,059 million in Q4 2024, compared to $94,920 million in Q4 2023, reflecting a growth of 3.6%[31] - Cash and other investments as of December 31, 2024, were $641,042,000, up from $560,675,000 in 2023[22] Dividends - The board declared a quarterly dividend of $0.31 per share, payable on Feb. 14, 2025[3] - Dividends declared per share increased to $2.21 in 2024 from $1.11 in 2023[21]

Financial Performance - Q4 2024 diluted EPS was $1.04, up from $0.96 in Q4 2023, with net income of $84.7 million compared to $82.2 million in Q4 2023 [1] - Full-year 2024 EPS was $3.23, down from $3.40 in 2023, with net income of $268.3 million compared to $299.0 million in 2023 [1] - Full-year 2024 results included a $66.3 million non-cash expense related to the impairment of an intangible asset [1] Assets Under Management - Total managed assets reached a record $829.6 billion at Dec 31, 2024, up 10% from $757.6 billion at Dec 31, 2023 [2] - Average managed assets for Q4 2024 were $804.4 billion, up 10% from $728.0 billion in Q4 2023 [2] - Money market assets reached a record $630.3 billion at Dec 31, 2024, up 13% from $560.0 billion at Dec 31, 2023 [7] Revenue and Expenses - Q4 2024 revenue increased 8% to $424.7 million, driven by higher average money market and equity assets [8] - 51% of Q4 2024 revenue came from money market assets, 48% from long-term assets, and 1% from other sources [8] - Operating expenses increased 9% in Q4 2024, primarily due to higher compensation and distribution expenses [9] Asset Class Performance - Equity assets were $79.4 billion at Dec 31, 2024, down 5% from $83.6 billion at Sept 30, 2024 [4] - Fixed-income assets were $98.1 billion at Dec 31, 2024, up 3% from $94.9 billion at Dec 31, 2023 [5] - Alternative/private markets assets were $18.9 billion at Dec 31, 2024, down 8% from $20.6 billion at Dec 31, 2023 [6] Dividend and Share Repurchase - The board declared a quarterly dividend of $0.31 per share, payable on Feb 14, 2025 [3] - In Q4 2024, the company purchased 552,533 shares of Class B common stock for $22.1 million [3] Industry Position - The company ranks in the top 7% of equity fund managers, top 9% of money market fund managers, and top 10% of fixed-income fund managers [20] - The company manages $829.6 billion in assets and serves over 10,000 institutions and intermediaries worldwide [19]

Company Overview - Federated Hermes, Inc. is a global leader in active, responsible investment management with $800.5 billion in assets under management as of September 30, 2024 [4] - The company provides a wide range of investment solutions including equity, fixed-income, alternative/private markets, multi-asset, and liquidity management strategies to over 10,000 institutions and intermediaries worldwide [4] - Federated Hermes serves a diverse client base including corporations, government entities, insurance companies, foundations, endowments, banks, and broker/dealers [4] - The company is headquartered in Pittsburgh and employs more than 2,000 people across various global offices including London, New York, and Boston [4] Upcoming Financial Reporting - Federated Hermes will report its financial and operating results for the quarter and year ended December 31, 2024, after the market closes on January 30, 2025 [1] - A conference call for investors and analysts is scheduled for 9 a.m. Eastern on January 31, 2025, hosted by President and CEO J. Christopher Donahue and CFO Thomas R. Donahue [1] Conference Call Details - Investors can listen to the conference call by dialing 888-506-0062 (domestic) or 973-528-0011 (international) or by visiting FederatedHermes.com for real-time Internet access [2] - A telephone replay of the call will be available starting at approximately 12:30 p.m. Eastern on January 31, 2025, with access codes provided for domestic and international listeners [3] - The online replay will be accessible via FederatedHermes.com for one year [3]

Core Insights - Federated Hermes is experiencing growth in assets under management (AUM) and has a strong liquidity position, but rising expenses pose a near-term concern [1][6] Group 1: Factors Fuelling Federated Hermes - The acquisition of money market assets has led to a 10.5% increase in money market AUM in the first nine months of 2024 compared to the same period in 2023, enhancing the company's fund offerings [2] - The company's average AUM has shown a five-year compound annual growth rate (CAGR) of 11.9% as of 2023, with continued growth in the first nine months of 2024, driven by strategic acquisitions and alliances [3] - As of September 30, 2024, Federated Hermes had long-term debt of $348 million and cash and other investments totaling $565 million, supporting its capital distribution activities, including a 10.7% increase in quarterly dividends to 31 cents per share [4] Group 2: Share Repurchase and Return on Equity - The company has authorized an additional share repurchase program of up to 5 million shares, with 1.24 million shares available under the existing program as of September 30, 2024 [5] - Federated Hermes boasts a trailing 12-month return on equity (ROE) of 29.85%, significantly higher than the industry average of 12.87%, indicating effective utilization of shareholders' funds [5] Group 3: Challenges Facing Federated Hermes - Rising operating expenses have been a concern, with a five-year CAGR of 8.7% from 2018 to 2023, primarily driven by intangible asset-related costs, and this trend has continued into the first nine months of 2024 [6] - Net investment advisory fees accounted for 67.2% of total revenues in the first nine months of 2024, making the company vulnerable to fluctuations in the fair value of securities and redemption levels, which could impact revenues and profitability [7] Group 4: Market Performance - Federated Hermes currently holds a Zacks Rank 1 (Strong Buy), with its shares gaining 25% over the past year, compared to a 39.6% rise in the industry [8]

Core Viewpoint - Federated Hermes is well-positioned to continue its earnings-beat streak, having consistently surpassed earnings estimates in recent quarters [1][3]. Earnings Performance - In the most recent quarter, Federated Hermes reported earnings of $1.06 per share, exceeding the expected $0.92 per share by a surprise of 15.22% [2]. - For the previous quarter, the company reported $0.96 per share against an expectation of $0.89 per share, resulting in a surprise of 7.87% [2]. Earnings Estimates and Predictions - There has been a favorable change in earnings estimates for Federated Hermes, with a positive Earnings ESP of +5.52%, indicating bullish sentiment among analysts regarding the company's earnings prospects [3][6]. - The combination of a positive Earnings ESP and a Zacks Rank of 2 (Buy) suggests a high likelihood of another earnings beat [6]. Statistical Insights - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [4]. - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [5].

Core Viewpoint - Value investing remains a preferred strategy for identifying strong stocks, utilizing fundamental analysis and traditional valuation metrics to find undervalued stocks in the market [2] Company Overview: Federated Hermes (FHI) - Federated Hermes currently holds a Zacks Rank of 1 (Strong Buy) and a Value grade of A, indicating strong potential for value investors [4] - The stock has a Forward P/E ratio of 10.12, significantly lower than the industry's average Forward P/E of 17.77, with a 12-month range of 8.42 to 10.48 and a median of 9.56 [4] - FHI's P/B ratio stands at 3.18, compared to the industry's average P/B of 4.04, with a 52-week range of 2.32 to 3.27 and a median of 2.67 [5] - The P/S ratio for FHI is 2.17, which is lower than the industry's average P/S of 3.27, indicating a favorable valuation based on sales [6] - FHI has a P/CF ratio of 9.34, well below the industry's average P/CF of 36.28, with a 12-month range of 7.51 to 9.60 and a median of 8.52 [7] - Overall, the metrics suggest that Federated Hermes is likely undervalued, making it one of the strongest value stocks in the market based on its earnings outlook [8]

Core Viewpoint - Federated Hermes (FHI) is currently viewed as a better value opportunity compared to BlackRock Finance (BLK) based on various valuation metrics and earnings outlook [1][7]. Valuation Metrics - FHI has a forward P/E ratio of 13.50, while BLK has a forward P/E of 24 [5]. - The PEG ratio for FHI is 1.46, indicating a more favorable valuation relative to its expected earnings growth compared to BLK's PEG ratio of 1.85 [5]. - FHI's P/B ratio stands at 3.21, compared to BLK's P/B of 3.82, suggesting that FHI is more undervalued in terms of market value versus book value [6]. Earnings Outlook - FHI is currently experiencing an improving earnings outlook, which contributes to its strong Zacks Rank of 1 (Strong Buy), while BLK holds a Zacks Rank of 2 (Buy) [3][7].