Federated Hermes delivered a quarter that exceeded Wall Street expectations, with management attributing the performance to record assets under management, particularly led by gains in money market and equity strategies. CEO John Donahue highlighted the impact of solid results from the MDT (Multi-Dimensional Team) equity strategies and strong inflows in money market funds, saying, “We reached another record high at the end of Q3 for total money market assets.” The quarter also benefited from improved fixed income net sales and a termination fee related to a U.K. property trust restructuring.
Is now the time to buy FHI? Find out in our full research report (it’s free for active Edge members).
Federated Hermes (FHI) Q3 CY2025 Highlights:
- Revenue: $469.4 million vs analyst estimates of $445.1 million (14.9% year-on-year growth, 5.5% beat)
- Adjusted EPS: $1.34 vs analyst estimates of $1.12 (19.9% beat)
- Adjusted EBITDA: $139.2 million (29.7% margin, 10.3% year-on-year growth)
- Operating Margin: 27.6%, in line with the same quarter last year
- Market Capitalization: $3.71 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Federated Hermes’s Q3 Earnings Call
- Michael Cho (JPMorgan) asked about the growth potential and pace of the MDT franchise as it scales internationally. CEO John Donahue responded that the opportunity set is "enthusiastic and optimistic," citing a diverse pipeline across client types and geographies.
- Michael Cho (JPMorgan) followed up on expense management, given ongoing investments in digital assets, alternatives, and the FCP acquisition. CFO Thomas Donahue said incremental expenses are expected to be matched by new revenue and described any outsized costs as "success items."
- Robin Holby (TD Cowen) asked about institutional allocation trends and the pace of deploying the current pipeline. CEO John Donahue detailed recent wins in Belgium, Canada, the U.K., South Korea, and the Middle East, and President Ray Hanley noted that two-thirds of the pipeline is expected to fund in the next quarter.
- Robin Holby (TD Cowen) inquired about alternative funding pacing, to which Hanley explained that funding for alternatives often has a longer tail, with half of alt funding expected in the next two quarters.
- No further analyst questions were recorded on the call.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace and breadth of institutional funding for MDT and private market strategies, (2) progress in integrating FCP and scaling the U.S. real estate platform, and (3) continued advancement of digital asset products and tokenized fund offerings. Execution on these fronts, along with expense management as new initiatives are rolled out, will be key indicators of Federated Hermes’ ability to sustain growth and profitability.
Federated Hermes currently trades at $50.21, up from $47.35 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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