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Federated Hermes (FHI)
NYSE:FHI
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Federated Hermes
(NYSE:FHI)
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Rating:78Outperform
Price Target:
$60.00
▲(16.26% Upside)
Federated Hermes has a strong financial foundation and is attractively valued, which are the most significant factors in its score. The positive technical indicators support the stock's upward momentum, though caution is advised due to potential overbought conditions. The earnings call highlights strong growth in assets under management, but challenges in fixed income and performance fees are concerns.
Positive Factors
Record Assets Under Management
Achieving record AUM indicates strong client trust and effective investment strategies, enhancing revenue potential through management fees.
Advancement in Digital Asset Integration
Integrating digital assets positions Federated Hermes at the forefront of financial innovation, potentially attracting tech-savvy investors and expanding market reach.
Strong Performance in Equity Strategies
Strong equity strategy performance reflects effective fund management and competitive advantage, supporting long-term growth in AUM and fee income.
Negative Factors
Decrease in Fixed Income Assets
Declining fixed income assets may indicate challenges in this segment, potentially affecting revenue from associated management fees.
Restructuring of U.K. Property Trust
Significant redemptions from the U.K. Property Trust could impact AUM and revenue, suggesting potential instability in real estate investments.
Lower Performance Fees and Carried Interest
Reduced performance fees can impact profitability, indicating possible challenges in achieving benchmark-beating returns across investment strategies.
Federated Hermes (FHI) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$3.99B
Dividend Yield2.52%
Average Volume (3M)673.25K
Price to Earnings (P/E)11.6
Beta (1Y)0.56
Revenue Growth5.92%
EPS Growth54.93%
CountryUS
Employees2,000
SectorFinancial
Sector Strength70
IndustryAsset Management
Share Statistics
EPS (TTM)1.16
Shares Outstanding77,551,060
10 Day Avg. Volume873,971
30 Day Avg. Volume673,246
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap0.84
Enterprise Value/Revenue1.99
Enterprise Value/Gross Profit2.98
Enterprise Value/Ebitda6.45
Forecast
1Y Price Target
$52.00Price Target Upside0.76% Upside
Rating ConsensusHold
Number of Analyst Covering4
Federated Hermes Business Overview & Revenue Model
Company DescriptionFederated Hermes (FHI) is a global investment management firm that provides a diverse range of investment solutions across various asset classes. The company operates in key sectors including equities, fixed income, money market, and alternative investments, serving institutional and retail clients. Federated Hermes is also known for its focus on responsible investing and sustainability, incorporating environmental, social, and governance (ESG) factors into its investment strategies.
How the Company Makes MoneyFederated Hermes generates revenue primarily through investment management fees charged to clients for managing their assets. These fees are typically based on a percentage of the assets under management (AUM), which can fluctuate with market conditions and client inflows or outflows. Additionally, the company earns performance fees when investment returns exceed certain benchmarks. Federated Hermes also benefits from revenue generated through its money market fund offerings, which provide liquidity and short-term investment options for clients. Significant partnerships with institutional investors and financial advisors enhance its distribution capabilities and client base, contributing to the company's overall earnings. Moreover, the firm's commitment to ESG investing attracts a growing segment of clients who prioritize sustainable investment practices, potentially leading to increased AUM and associated fee income.
Federated Hermes Earnings Call Summary
Earnings Call Date:Jul 31, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 23, 2025
Earnings Call Sentiment Positive
The earnings call reflects a positive sentiment driven by record assets under management, strong equity strategy performance, and advancements in digital assets. However, this is tempered by challenges in fixed income asset retention and lower performance fees.Q2-2025 Updates
Positive Updates
Record Assets Under Management
Federated Hermes ended Q2 2025 with record assets under management of $846 billion, driven by a $8.1 billion or 10% increase in equity strategies.
Strong Performance in Equity Strategies
MDT equity strategies had net sales of $3.8 billion in Q2, up from $3.3 billion in Q1. Seven out of eight MDT equity mutual fund strategies are in the top performance quartile for the trailing three years.
Expansion in Alternative Private Markets
Assets in the alternative private markets category increased by $1.3 billion or 7% in Q2. The company completed the acquisition of a majority interest in Rivington Energy Management Limited.
Advancement in Digital Asset Integration
Federated Hermes is participating in a collaborative initiative with Bank of New York and Goldman Sachs to use blockchain technology for money market funds. They are also subadvisors for a private tokenized fund with $425 million in assets.
Share Repurchase Program
The Board of Directors approved a new share repurchase program for 5 million shares, in addition to the 1.1 million shares remaining from the prior program.
Negative Updates
Decrease in Fixed Income Assets
Fixed income assets decreased by about $800 million or 1% in Q2 due to net redemptions of $2.4 billion.
Restructuring of U.K. Property Trust
Federated Hermes is restructuring its U.K. Property Trust, resulting in $1.2 billion in redemptions expected in Q3.
Lower Performance Fees and Carried Interest
Total Q2 carried interest and performance fees were $1.4 million compared to $5.9 million last quarter.
Company Guidance
In the Federated Hermes, Inc. Second Quarter 2025 Analyst Call, Chris Donahue, CEO, reported that the company achieved a record $846 billion in assets under management by the end of Q2, with a notable $8.1 billion increase in equity assets (a 10% rise from the previous quarter). The equity net sales for the quarter were $1.8 billion, reflecting an organic growth rate of nearly 9%. The MDT fundamental quant strategies continued to perform well, with net sales of $3.8 billion in Q2, up from $3.3 billion in Q1. Fixed income assets saw a decrease of $800 million due to net redemptions of $2.4 billion, although this was partially offset by a $1.6 billion increase from higher market valuations and FX. Money market fund assets reached a record high of $468 billion, up by $3.1 billion despite seasonal declines, while money market separate accounts experienced a $5.9 billion decrease due to seasonal patterns. The firm is also exploring digital asset opportunities, including tokenized money market funds, and reported a money market mutual fund market share of 7.11% at the end of Q2, slightly up from 7.10% in Q1.Federated Hermes Financial Statement Overview
Summary
Federated Hermes shows strong financial health with robust profitability and a stable balance sheet. The company maintains efficient operations and a conservative leverage position. However, the slowdown in revenue growth and recent declines in free cash flow growth are areas to monitor.Income Statement
Federated Hermes demonstrates strong profitability with a consistent gross profit margin around 66% and a net profit margin improving to 21.8% in TTM. Revenue growth is modest but positive, indicating steady expansion. EBIT and EBITDA margins are robust, reflecting efficient operations. However, the revenue growth rate has slowed compared to previous years, which could indicate a maturing market or increased competition.85
Very Positive
Balance Sheet
The company maintains a healthy balance sheet with a low debt-to-equity ratio of 0.22 in TTM, indicating conservative leverage. Return on equity is strong at 30.3%, showcasing effective use of equity to generate profits. The equity ratio is stable, suggesting a solid capital structure. However, the increase in total debt from previous periods could be a point of concern if it continues to rise.78
Positive
Cash Flow
Operating cash flow to net income ratio is strong at 1.23, indicating good cash generation relative to net income. Free cash flow to net income ratio is slightly above 1, showing effective cash management. However, free cash flow growth has declined by 18.7% in TTM, which could impact future flexibility in investments or debt repayment.72
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.68B | 1.63B | 1.61B | 1.45B | 1.30B | 1.45B |
| Gross Profit | 1.12B | 1.09B | 1.05B | 933.10M | 767.96M | 944.87M |
| EBITDA | 518.55M | 416.70M | 427.60M | 396.40M | 396.28M | 448.08M |
| Net Income | 366.33M | 268.31M | 298.98M | 239.50M | 270.29M | 326.36M |
Balance Sheet | ||||||
| Total Assets | 2.15B | 2.08B | 2.10B | 2.02B | 2.02B | 2.06B |
| Cash, Cash Equivalents and Short-Term Investments | 607.48M | 641.04M | 560.67M | 521.75M | 426.67M | 438.77M |
| Total Debt | 348.24M | 461.97M | 457.94M | 452.78M | 346.07M | 212.77M |
| Total Liabilities | 874.49M | 933.96M | 947.75M | 912.97M | 840.97M | 686.86M |
| Stockholders Equity | 1.58B | 1.10B | 1.13B | 1.05B | 1.11B | 1.14B |
Cash Flow | ||||||
| Free Cash Flow | 281.22M | 342.53M | 303.92M | 319.58M | 159.96M | 359.74M |
| Operating Cash Flow | 276.94M | 346.55M | 311.83M | 323.95M | 170.38M | 373.24M |
| Investing Cash Flow | -3.48M | 64.25M | -30.61M | -32.36M | 10.82M | -24.82M |
| Financing Cash Flow | -228.06M | -286.40M | -243.09M | -168.51M | -249.47M | -295.14M |
Federated Hermes Technical Analysis
Neutral
51.61
Price Trends
51.62
Negative
47.32
Positive
43.00
Positive
Market Momentum
0.09
Positive
44.08
Neutral
11.62
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FHI, the sentiment is Neutral. The current price of 51.61 is below the 20-day moving average (MA) of 52.80, below the 50-day MA of 51.62, and above the 200-day MA of 43.00, indicating a neutral trend. The MACD of 0.09 indicates Positive momentum. The RSI at 44.08 is Neutral, neither overbought nor oversold. The STOCH value of 11.62 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for FHI.
Federated Hermes Risk Analysis
Federated Hermes disclosed 24 risk factors in its most recent earnings report. Federated Hermes reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Federated Hermes Peers Comparison
Overall Rating
UnderperformOutperform
Sector (68)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $3.99B | 11.65 | 32.69% | 2.52% | 5.92% | 54.93% | |
76 Outperform | 4.19B | 11.28 | ― | 8.88% | ― | 16.78% | |
71 Outperform | 3.67B | 9.73 | ― | 12.00% | 32.19% | -13.72% | |
71 Outperform | 4.40B | 16.25 | 12.84% | 2.89% | 19.81% | 12.83% | |
71 Outperform | 3.40B | 21.18 | 30.67% | 3.69% | 12.95% | 23.72% | |
67 Neutral | 3.57B | 12.00 | 64.76% | 8.15% | 9.98% | 12.97% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% |
* Financial Sector Average
Performance Comparison
FHI
Federated Hermes
51.61
15.72
43.80%
AB
AllianceBernstein
38.07
6.00
18.71%
CNS
Cohen & Steers
66.37
-26.57
-28.59%
GBDC
Golub Capital Bdc
13.75
0.34
2.54%
APAM
Artisan Partners
43.80
3.91
9.80%
VCTR
Victory Capital Holdings
65.34
11.37
21.07%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.