On Monday, RBC Capital Markets adjusted its price target on Federated Hermes Inc. (NYSE:FHI), a global investment manager, increasing it to $39.00, up from the previous $36.00. The firm has decided to maintain its Sector Perform rating on the stock.
The revision followed Federated Hermes' third-quarter earnings per share (EPS) which surpassed expectations, largely due to seed capital gains. Even when excluding these gains, the EPS still outperformed the firm's forecasts. The positive outcome was further supported by net flows, which were significantly better than anticipated.
RBC Capital has updated its estimates for Federated Hermes. Despite moderating its money market fund (MMF) assets under management (AUM) growth projections, the firm still anticipates substantial institutional MMF AUM growth. This outlook is underpinned by the initiation of the federal funds rate cutting cycle, which could influence the growth trajectory of money market funds.
The analyst at RBC Capital explained the rationale behind maintaining the Sector Perform rating, suggesting that the risk/reward profile for Federated Hermes is currently balanced. The new price target of $39 reflects the firm's adjusted expectations and market conditions that have influenced their analysis.
Investors and market watchers will likely observe how Federated Hermes' stock responds to the updated price target and the company's performance in the context of the ongoing federal funds rate adjustments.
In other recent news, Federated Hermes Inc. has had its target price increased by Deutsche Bank to $43, up from $42, following a third-quarter earnings report that exceeded expectations. The company reported an earnings per share (EPS) of $1.06, surpassing the consensus estimate of $0.93. Despite some complexities due to tax rate adjustments and other expenses, the market responded positively to the earnings report.
Evercore ISI also raised its target for Federated Hermes to $41 from $38, acknowledging the company's better-than-expected long-term outflows.
In other developments, the Federal Reserve has signaled potential rate cuts in response to weakening economic data and employment figures. Federal Reserve Governor Lisa Cook has expressed support for these rate cuts, emphasizing the importance of preserving the current labor market. The upcoming employment reports will be crucial in determining the pace and extent of the rate cuts needed to achieve full employment.
These recent developments indicate a potential shift in monetary policy, with the Federal Reserve now focusing more on the job market than on inflation. This shift, coupled with the positive financial results from Federated Hermes, paints a picture of a fluid and evolving financial landscape.
InvestingPro Insights
To complement RBC Capital's analysis, recent data from InvestingPro offers additional context on Federated Hermes' financial position. The company's market capitalization stands at $3.01 billion, with a P/E ratio of 12.21, suggesting a relatively modest valuation compared to some peers in the investment management sector.
InvestingPro Tips highlight that Federated Hermes has maintained dividend payments for 27 consecutive years, underscoring its commitment to shareholder returns. This aligns with the company's strong financial position, as another tip notes that liquid assets exceed short-term obligations. These factors may contribute to the balanced risk/reward profile mentioned by RBC Capital.
The company's revenue for the last twelve months as of Q3 2024 was $1.59 billion, with a slight growth of 0.44%. While this growth is modest, it's worth noting that Federated Hermes has been profitable over the last twelve months, with a gross profit margin of 66.8% and an operating income margin of 21.9%.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and metrics beyond those mentioned here. In fact, there are 7 more InvestingPro Tips available for Federated Hermes, providing deeper insights into the company's financial health and market position.
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