On Monday, Evercore ISI updated its outlook on Federated Hermes Inc. (NYSE:FHI), raising the price target to $41.00 from the previous $38.00 while maintaining an Outperform rating on the shares. The firm acknowledged the company's better-than-expected long-term (L-T) outflows, which were significantly less than anticipated.
Federated Hermes Inc. reported L-T outflows of -$0.4 billion, a rate of -1%. This figure markedly surpassed the forecasted -$2 billion and showed a substantial improvement from the previous quarter's -$5 billion, which represented a -10.5% rate. The improvement in outflows was primarily attributed to the company's equity segment, notably the strategic-value dividend strategy, which has seen a recent uptick in performance.
The progress in Federated Hermes's equity segment was a key factor in the revised expectations, particularly as a positive turn for fixed income had already been factored into projections. The third quarter of 2024's L-T flows were highlighted as the best result since the same quarter of the previous year, indicating a potential turnaround for the company.
Evercore ISI suggested that if Federated Hermes's equity funds continue to recover and fixed income builds on its current trajectory, the company could reverse a four-quarter negative streak. This outlook reflects an anticipation of continued positive developments within Federated Hermes's investment strategies.
InvestingPro Insights
To complement Evercore ISI's positive outlook on Federated Hermes Inc. (NYSE:FHI), recent data from InvestingPro offers additional perspective on the company's financial health and market performance. FHI's market capitalization stands at $3.01 billion, with a P/E ratio of 12.21, suggesting a relatively modest valuation compared to its earnings.
InvestingPro Tips highlight that Federated Hermes has maintained dividend payments for 27 consecutive years, demonstrating a strong commitment to shareholder returns. This aligns well with the company's improving outflows and potential for a turnaround as noted in the article. Additionally, FHI's cash flows can sufficiently cover interest payments, indicating financial stability that could support its strategic initiatives and dividend policy.
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 modest, this growth, coupled with the better-than-expected long-term outflows mentioned in the article, suggests that Federated Hermes may be positioning itself for improved performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into Federated Hermes's financial position and future prospects.
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