Yahoo Finance Federated Hermes Inc Reports Strong Earnings Growth and Record AUM in Q4 and Full-Year 2023
Earnings Per Share (EPS): Q4 2023 EPS rose to $0.96, up from $0.63 in Q4 2022, with full-year EPS climbing to $3.40 from $2.65.
Assets Under Management (AUM): Record high of $757.6 billion, a 13% increase year-over-year.
Dividend: Board declares a quarterly dividend of $0.28 per share.
Stock Repurchase: 1,902,861 Class B common stock shares bought back in Q4 2023 for $61.0 million.
Revenue: Increased by 5% in Q4 2023 compared to Q4 2022, driven by higher average money market assets.
Operating Expenses: Decreased by 7% in Q4 2023 compared to Q4 2022, primarily due to an intangible asset impairment in Q4 2022.
On January 25, 2024, Federated Hermes Inc (NYSE:FHI), a global leader in active, responsible investing, released its 8-K filing, announcing its fourth quarter and full-year earnings for 2023. The company reported a substantial increase in earnings per diluted share (EPS) for Q4 2023, which stood at $0.96 compared to $0.63 for the same quarter last year. The full-year EPS also saw a significant rise to $3.40 from $2.65 in 2022. Net income for Q4 2023 was $82.2 million, compared to $56.5 million for Q4 2022, and the full-year net income reached $299.0 million, up from $239.5 million in 2022.
Federated Hermes Inc specializes in providing asset management services for both institutional and individual investors. As of the end of September 2023, the company managed $715.2 billion in assets, with a diverse portfolio that includes equity, multi-asset, fixed-income, alternative, and money market funds. The firm's cash-management operations are expected to generate around 46% of Federated's revenue this year. The company distributes its products through trust banks, wealth managers, retail broker/dealers, institutional investors, and international clients.
Performance Highlights and Financial Achievements
Federated Hermes Inc's total managed assets reached a record $757.6 billion at the end of 2023, marking a 13% increase from the previous year. This growth was primarily driven by an increase in money market assets, as the company's liquidity products continued to be a crucial cash management resource for clients. The board of directors declared a quarterly dividend of $0.28 per share, payable on February 15, 2024, to shareholders of record as of February 8, 2024.
The company's equity assets were $79.3 billion at the end of 2023, while fixed-income assets increased to $94.9 billion, up 9% from the previous year. Alternative/private markets assets stood at $20.6 billion. Money market assets reached a record $560.0 billion, a 17% increase from the previous year. These financial achievements are particularly important for an asset management company like Federated Hermes Inc, as they reflect the firm's ability to attract and retain client assets, even amidst market volatility.
Financial Metrics and Commentary
Revenue for Q4 2023 increased by 5% primarily due to higher average money market assets and an increase in total carried interest and performance fees. Operating expenses decreased by 7% mainly due to an intangible asset impairment in Q4 2022. Nonoperating income (expenses), net, increased by $3.3 million, primarily due to an increase in investment yields as a result of rising interest rates.
Federated Hermes' record assets at year-end were driven by another quarter of money market asset increases, as our liquidity products continued to provide a vital cash management resource for clients," said J. Christopher Donahue, president and chief executive officer.
For the full year, revenue increased by 11% primarily due to higher average money market assets and the elimination of voluntary fee waivers. Operating expenses increased by 10%, largely due to increased distribution expenses and compensation expense related to consolidated carried interest vehicles. Nonoperating income (expenses), net, increased by $54.4 million, primarily due to an increase in the market value of investments and rising investment yields.
Analysis and Outlook
Federated Hermes Inc's performance in Q4 and the full year of 2023 demonstrates the company's resilience and strategic positioning in the asset management industry. The increase in AUM and revenue, coupled with the control of operating expenses, underscores the company's operational efficiency and ability to capitalize on market opportunities. The growth in money market assets reflects the trust clients place in Federated Hermes Inc's liquidity solutions, particularly in a volatile market environment.
While the company faces challenges such as market volatility and changing investor preferences, its diversified asset management strategies and global presence position it well to navigate these uncertainties. The financial results and strategic initiatives indicate a positive outlook for Federated Hermes Inc, as it continues to focus on delivering value to its clients and shareholders.
For more detailed information and to access the earnings teleconference, investors are invited to visit Federated Hermes Inc's website. The company's financial results are subject to various factors, including market conditions, investment performance, and investor behavior, which can significantly impact business activity levels and financial outcomes.
Explore the complete 8-K earnings release (here) from Federated Hermes Inc for further details.
This article first appeared on GuruFocus.
