On Mar 18, 2013, we reiterated our long-term recommendation on
T. Rowe Price Group, Inc.
) at Neutral based on the company's potential to take advantage
of the economic recovery and benefit from the growth
opportunities in the domestic and global assets under management
(AUM). However, competitive pressures amid economic headwinds
remain the major causes of concern.
T. Rowe Price reported its fourth-quarter 2012 net income of 88
cents per share, which though were a penny below the Zacks
Consensus Estimate, compared favorably with the prior-year
quarter earnings of 73 cents. Top-line growth and increased AUM
were the positives for the quarter.
T. Rowe Price remains debt free with substantial liquidity that
includes cash and mutual fund investment holdings of about $2.0
billion. This has assisted in strengthening the company's capital
leverage and generating a return on earnings that is
substantially higher than the industry average.
In Feb 2013, T. Rowe Price's board of directors approved a 12.0%
hike in the company's quarterly common stock dividend to be paid
on Mar 27, 2013 to stockholders of record as of business on Mar
13, 2012. The revised quarterly dividend now stands at 38 cents
per share. This marks T. Rowe's 27th consecutive annual dividend
increase, reflecting the company's commitment to return value to
shareholders with its strong cash generation capabilities.
However, at the current level, the asset management business is
under cyclical and secular pressures along with ongoing margin
pressures, many of which have been aggravated by the financial
crisis. These pressures include volatile markets and new
regulatory compliances. Though T. Rowe Price remains well
positioned over the long term, given short-term performance
hindrances and macro headwinds, a limited upside is expected in
The Zacks Consensus Estimate for 2013 has remained stable at
$3.79 per share over the last 30 days. Moreover, the Zacks
Consensus Estimate for 2014 has moved north by 0.2% to $4.30 over
the same time frame. Currently, the company retains a Zacks Rank
Other Major Companies to Consider
Besides T. Rowe Price, other investment managers that are worth
Apollo Global Management LLC
Virtus Investment Partners Inc.
). All the companies retain a Zacks Rank #1 (Strong Buy).
APOLLO GLOBAL-A (APO): Free Stock Analysis
LAZARD LTD (LAZ): Free Stock Analysis Report
T ROWE PRICE (TROW): Free Stock Analysis
VIRTUS INVESTMT (VRTS): Free Stock Analysis
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