T. Rowe Price Group Inc.
) reported its first-quarter 2012 earnings of 75 cents per share,
marginally below the Zacks Consensus Estimate of 77 cents. However,
this compares favorably with the prior-year quarter's earnings of
Better-than-expected top-line growth was more-than-offset by
higher non-interest expenses. However, increased assets under
management (AUM) were positive for the quarter.
T. Rowe Price's net income available to common shareholders grew
1.4% to $196.5 million from $193.8 million in the year-ago
Behind the Headlines
Net revenue improved 6.8% to $728.7 million from $628.4 million
in the year-ago period. The upsurge was largely due to higher
distribution and servicing fees (up 74.8% from the year-ago
quarter), investment advisory fees (up 5.8% from the prior-year
quarter) and administrative fees (up 3.1% from the prior-year
quarter). Moreover, net revenue surpassed the Zacks Consensus
Estimate of $713.0 million.
Investment advisory revenues earned from the T. Rowe Price
mutual funds distributed in the U.S., climbed 6.3% year over year
to $425.9 million in the quarter under review. Investment advisory
revenues earned from other investment portfolios, which are managed
by the company, increased 4.7% from the year-ago quarter to $197.1
Total operating expenses jumped 11.2% year over year to $412.5
million in the reported quarter. The increase was primarily
attributable to higher compensation and related costs, distribution
and servicing costs as well as depreciation and amortization
Total AUM increased to $554.8 billion as of March 31, 2012, up
13.3% compared with $489.4 billion as of December 31, 2011. Market
appreciation and income of $52.9 billion along with net cash
inflows of $12.4 billion led to a substantial increase in AUM at
the end of the reported quarter. Moreover, average AUM increased
6.4% year over year to $530.3 million in the first-quarter of
T. Rowe Price remains debt-free with substantial liquidity,
including cash and mutual fund investment holdings of about $1.9
billion, which supports the company's ability to continue investing
in the future. As of March 31, 2012, the company had $265.8 million
in operating cash flows, including $24.1 of stock-based
T. Rowe Price expects capital expenditures for the year 2012 to
be approximately $100 million for property and equipment
T. Rowe Price's financial stability has the potential to take
advantage of the improving economy and benefit from the growth
opportunities in the domestic and global AUM. With a debt-free
position and higher return on earnings, we believe that the
fundamentals will continue to remain strong. However, higher
operating expenses and stringent regulatory norms could be the
causes of concern.
One of the peers of T. Rowe price,
Waddell & Reed Financial Inc.
) is expected to report its first-quarter 2012 earnings on April
T. Rowe Price currently retains its Zacks #1 Rank, which
translates to a short-term 'Strong Buy' rating.
T ROWE PRICE (
): Free Stock Analysis Report
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