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Federated Hermes, Inc. Just Beat EPS By 6.0%: Here's What Analysts Think Will Happen Next

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Simply Wall St
·4 min read
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Federated Hermes, Inc. (NYSE:FHI) shareholders are probably feeling a little disappointed, since its shares fell 9.9% to US$27.00 in the week after its latest annual results. The result was positive overall - although revenues of US$1.4b were in line with what the analysts predicted, Federated Hermes surprised by delivering a statutory profit of US$3.23 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Federated Hermes

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, Federated Hermes' six analysts currently expect revenues in 2021 to be US$1.42b, approximately in line with the last 12 months. Statutory earnings per share are expected to dip 2.7% to US$3.16 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$1.40b and earnings per share (EPS) of US$3.02 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at US$30.83, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Federated Hermes analyst has a price target of US$35.00 per share, while the most pessimistic values it at US$25.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.7%, a significant reduction from annual growth of 7.4% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.6% annually for the foreseeable future. It's pretty clear that Federated Hermes' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Federated Hermes' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Federated Hermes going out to 2022, and you can see them free on our platform here.

Plus, you should also learn about the 2 warning signs we've spotted with Federated Hermes (including 1 which shouldn't be ignored) .

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.