Federated Hermes (FHI) AI Stock Analysis

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Federated Hermes

(NYSE:FHI)

Rating:80Outperform

Price Target:―

Federated Hermes' overall score reflects its strong financial performance and promising earnings call insights, underscored by strategic growth initiatives in assets under management and acquisitions. The technical analysis suggests some caution due to potential overbought conditions, but valuation metrics support the stock's attractiveness. Key risks include market share challenges and financial uncertainties, which are balanced by robust operational fundamentals.

Federated Hermes (FHI) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$3.33B

Dividend Yield2.91%

Average Volume (3M)828.41K

Price to Earnings (P/E)11.9

Beta (1Y)0.55

Revenue Growth2.32%

EPS Growth1.08%

CountryUS

Employees2,000

SectorFinancial

Sector Strength82

IndustryAsset Management

Share Statistics

EPS (TTM)1.25

Shares Outstanding79,093,860

10 Day Avg. Volume825,430

30 Day Avg. Volume828,415

Financial Highlights & Ratios

PEG Ratio1.00

Price to Book (P/B)2.99

Price to Sales (P/S)0.00

P/FCF Ratio9.50

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$41.25

Price Target Upside-1.97% Downside

Rating ConsensusHold

Number of Analyst Covering4

Federated Hermes Business Overview & Revenue Model

Company DescriptionFederated Hermes, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to individuals, including high net worth individuals, banking or thrift institutions, investment companies, pension and profit sharing plans, pooled investment vehicles, charitable organizations, state or municipal government entities, and registered investment advisors. Through its subsidiaries, it manages separate client-focused equity, fixed income, balanced and money market mutual funds along with separate client-focused equity, fixed income, money market, and balanced portfolios. Through its subsidiaries, the firm invests in the public equity and fixed income markets across the globe. It invests in growth and value stocks of small-cap, mid-cap, and large-cap companies. The firm makes its fixed income investments in ultra-short, short-term, and intermediate-term mortgage-backed, U.S. Government, U.S. corporate, high yield, and municipal securities. It employs both fundamental and quantitative analysis to make its equity investments. Federated Hermes, Inc. was founded in 1955 and is based in Pittsburgh, Pennsylvania with additional offices in New York City and London, United Kingdom.

How the Company Makes MoneyFederated Hermes makes money primarily through the management fees it charges clients for its investment services. These fees are typically calculated as a percentage of the assets under management (AUM) and vary based on the type of investment product or service. The company offers a range of investment products, including mutual funds, separate accounts, and sub-advised funds, catering to both institutional and retail investors. In addition to management fees, Federated Hermes earns performance fees from certain investment products, which are contingent on surpassing specific performance benchmarks. The company also generates revenue from distribution fees and other service fees related to its investment products. Strategic partnerships and collaborations with financial advisors, institutions, and distribution networks further enhance Federated Hermes’ market reach and contribute to its revenue streams.

Federated Hermes Financial Statement Overview

Summary

Federated Hermes demonstrates strong financial health across all verticals, with consistent revenue growth, robust profitability margins, and prudent financial management. The balance sheet reflects stability with a healthy equity position and low leverage, while cash flows are strong, supporting operational and strategic initiatives. Continued focus on profitability and asset growth will be key to sustaining this positive trajectory.

Income Statement

Very Positive

Federated Hermes shows strong revenue growth with a consistent upward trajectory, indicated by a TTM revenue of $1.66 billion, up from the previous $1.63 billion. The gross profit margin remains robust at 77.55%, reflecting efficient cost management. The net profit margin is solid at 17.34%, with EBIT and EBITDA margins at 27.74% and 25.58%, respectively, indicating healthy operational performance. However, a slight decline in net income indicates potential pressures on profitability.

Balance Sheet

Positive

The balance sheet is strong with a favorable equity ratio of 71.49%, showcasing a stable financial foundation. The debt-to-equity ratio is low at 0.24, indicating prudent leverage management. Return on Equity (ROE) stands at approximately 20.11%, demonstrating effective use of equity to generate profits. However, total assets have slightly decreased, which could be a concern if it continues.

Cash Flow

Very Positive

Cash flow analysis reveals a stable operating cash flow of $346.82 million and consistent free cash flow generation, with a growth rate of approximately 14.13% from the previous year. The operating cash flow to net income ratio of 1.20 indicates strong cash conversion efficiency. The free cash flow to net income ratio is robust at 1.21, underscoring the company's capability to sustain operations and fund growth.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.66B	1.63B	1.61B	1.45B	1.30B	1.45B
	Gross Profit
1.18B	1.09B	1.05B	933.10M	767.96M	944.87M
	EBIT
460.13M	361.47M	387.55M	336.80M	366.27M	418.15M
	EBITDA
430.87M	416.70M	427.60M	411.80M	396.28M	448.08M
	Net Income Common Stockholders
285.07M	268.31M	298.98M	239.50M	270.29M	326.36M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
541.83M	641.04M	560.67M	521.75M	426.67M	438.77M
	Total Assets
2.00B	2.08B	2.10B	2.02B	2.02B	2.06B
	Total Debt
459.10M	461.97M	457.94M	365.98M	223.35M	75.00M
	Net Debt
71.53M	-42.47M	74.76M	29.19M	-9.98M	-226.82M
	Total Liabilities
858.72M	933.96M	947.75M	912.97M	904.17M	923.84M
	Stockholders Equity
1.08B	1.10B	1.13B	1.05B	1.11B	1.14B
Cash Flow		Free Cash Flow
345.91M	342.53M	303.92M	319.58M	159.96M	359.74M
	Operating Cash Flow
346.82M	346.55M	311.83M	323.95M	170.38M	373.24M
	Investing Cash Flow
32.41M	64.25M	-30.61M	-32.36M	10.82M	-24.82M
	Financing Cash Flow
-357.71M	-286.40M	-243.09M	-168.51M	-249.47M	-295.14M

Federated Hermes Technical Analysis

Technical Analysis Sentiment

Positive

Last Price42.08

Price Trends

50DMA

39.93

Positive

100DMA

39.14

Positive

200DMA

38.25

Positive

Market Momentum

MACD

0.94

Positive

RSI

56.75

Neutral

STOCH

26.83

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FHI, the sentiment is Positive. The current price of 42.08 is above the 20-day moving average (MA) of 41.97, above the 50-day MA of 39.93, and above the 200-day MA of 38.25, indicating a bullish trend. The MACD of 0.94 indicates Positive momentum. The RSI at 56.75 is Neutral, neither overbought nor oversold. The STOCH value of 26.83 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for FHI.

Federated Hermes Risk Analysis

Federated Hermes disclosed 23 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 1 New Risks

Artificial Intelligence Risks. Q4, 2024

Federated Hermes Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FHI	80 Outperform	$3.33B	11.85	24.98%	2.91%	2.32%	1.08%
VCTR	78 Outperform	$4.13B	13.65	26.57%	2.75%	6.53%	36.51%
AB	76 Outperform	$4.30B	10.48	20.69%	8.39%	―	53.17%
APAM	76 Outperform	$3.33B	11.63	69.81%	7.22%	7.18%	10.17%
GBDC	71 Outperform	$3.97B	13.25	8.88%	11.15%	16.10%	-24.30%
CNS	65 Neutral	$3.86B	24.78	35.42%	3.14%	10.26%	19.56%
Sector *	64 Neutral	$12.64B	9.78	7.67%	17015.08%	12.23%	-6.02%

* Financial Sector Average

Performance Comparison

FHI

Federated Hermes

42.08

10.60

33.67%

AllianceBernstein

39.14

8.30

26.91%

CNS

Cohen & Steers

75.75

6.56

9.48%

GBDC

Golub Capital Bdc

14.95

0.14

0.95%

APAM

Artisan Partners

40.43

-1.11

-2.67%

VCTR

Victory Capital Holdings

61.09

8.47

16.10%

Federated Hermes Earnings Call Summary

Earnings Call Date:Apr 24, 2025

(Q1-2025)

% Change Since: 10.77%|

Next Earnings Date:Jul 24, 2025

Earnings Call Sentiment Neutral

Federated Hermes reported record assets under management and strong sales in equity and alternative markets, alongside strategic acquisitions and increased dividends. However, challenges included decreased market share in money markets, mixed equity performance, and net redemptions in fixed-income assets. Additionally, there are uncertainties related to tax rate fluctuations and FX impacts on expenses.

Q1-2025 Updates

Positive Updates

Record Assets Under Management

Federated Hermes ended Q1 with record assets under management of $840 billion, driven by record money market assets of $637 billion.

Strong Equity Sales

Equity assets increased by $1.5 billion from year-end due mainly to net sales of $1.4 billion, with MDT strategies netting $2.5 billion in Q1, more than double the prior quarter's $1.2 billion.

Increase in Alternative Private Markets

Assets in the alternative private markets category increased by $562 million in Q1 due to FX rates and net sales of about $61 million.

Acquisition of Rivington Energy Management Limited

Federated Hermes completed the acquisition of a majority interest in a U.K. renewable energy company, enhancing their private markets platform.

Dividend Increase

The Board of Directors declared a $0.34 per share dividend, an increase of nearly 10% from the prior quarter dividend.

Negative Updates

Lower Money Market Fund Market Share

Federated Hermes' money market mutual fund market-share decreased slightly to about 7.10% at the end of Q1 from about 7.22% at the end of 2024.

Equity Performance Challenges

At the end of Q1, only 44% of equity funds were beating peers, with 31% in the top quartile of their category.

Fixed-Income Net Redemptions

For the first three weeks of Q2, combined fixed-income funds and SMAs had net redemptions of $88 million.

Tax Rate Fluctuations

The Q1 tax rate of 23.6% was lower than expected, but future expectations are between 25% to 28%, adding uncertainty to financial planning.

FX and VAT Impact on Expenses

Q1 operating expenses decreased due to a VAT refund and FX-related expense, indicating potential volatility in future quarters.

Company Guidance

During the Q1 2025 analyst call, Federated Hermes provided several key metrics and guidance indicators. The company reported record assets under management of $840 billion, driven mainly by money market assets totaling $637 billion. Equity assets increased by $1.5 billion, with significant contributions from MDT strategies, which saw net sales of $2.5 billion in Q1. Fixed income assets rose by approximately $1.4 billion, although this was offset by net redemptions. The alternative private markets category grew by $562 million, with ongoing fundraising efforts in European Direct Lending III and Global Private Equity Co-Invest funds. The company also highlighted a strategic acquisition in renewable energy, enhancing their private markets platform. Looking ahead, Federated Hermes has $3.9 billion in net institutional mandates yet to fund, including $1.8 billion in equities and $1.7 billion in private market strategies. Additionally, they anticipate fixed income net additions of about $400 million. The company continues to see opportunities in money market strategies, emphasizing their appeal during periods of market volatility.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.