T. Rowe Price Group, Inc. ( TROW ) reported its
first-quarter 2013 net income of 91 cents per share, marginally
outpacing the Zacks Consensus Estimate by 2 cents. Moreover,
earnings significantly outperformed the prior-year quarter earnings
of 75 cents.AFFIL MANAGERS (AMG): Free Stock Analysis
ReportINVESCO LTD (IVZ): Free Stock Analysis ReportT ROWE PRICE (TROW): Free Stock Analysis ReportVIRTUS INVESTMT (VRTS): Free Stock Analysis
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Better-than-expected results were driven by top-line growth and
improved assets under management (AUM), aided by positive net cash
inflows. However, elevated operating expenses remain a matter of
T. Rowe Price's net income came in at $242 million, surging 22%
from the prior-year quarter's income of $198 million.
Performance in Detail
Net revenue increased 11.9% to $816 million from $729 million in
the year-ago period. The rise was primarily due to an increase in
investment advisory fees that climbed 12.8% year over year to $703
million. However, net revenue was marginally below the Zacks
Consensus Estimate of $817 million.
Administrative fees also increased 3.6% year over year to $86
million. Distribution and servicing fees escalated 18.2% year over
year to $26 million. However, net revenue of the savings bank
subsidiary declined 50.0% year over year to $0.3 million.
Investment advisory revenues, earned from the T. Rowe Price mutual
funds distributed in the U.S., jumped 15% year over year to $491
million. Investment advisory revenues earned from other investment
portfolios managed by the company increased 7.6% from the year-ago
quarter to $212 million.
Total operating expenses climbed 7.3% year over year to $443
million in the quarter. The increase was primarily attributable to
high distribution and servicing costs, which grew 18.2% year over
year, increased depreciation and amortization expense, elevated
compensation and related costs along with escalated occupancy and
As of Mar 31, 2013, T. Rowe Price employed 5,408 associates, 3.2%
higher than last year.
Total AUM increased to $617.4 billion as of Mar 31, 2013, up 7%
from $574.4 billion as of Mar 31, 2012. During the quarter, market
appreciation and income came in at $37.3 billion along with net
cash inflows of $3.3 billion.
T. Rowe Price remains debt-free with substantial liquidity,
including cash and sponsored portfolio investment holdings of about
$2.5 billion, which support the company's ability to continue
investing in the future periods. As of Mar 31, 2013, the company
had $459.4 million in operating cash flows.
Capital Deployment Activity
The company's board of directors approved a 12% hike in the
quarterly common stock dividend in Feb 2013. The revised quarterly
dividend now stands at 38 cents per share compared with the
previous amount of 34 cents.
This marks the 27th consecutive annual dividend increase for this
investment manager, reflecting its commitment to return value to
shareholders with its strong cash generation capabilities. Prior to
this hike, the company had increased its dividend by 10% (from 31
cents to 34 cents per share) in Mar 2012.
T. Rowe Price is expecting capital expenditures in 2013 to be
approximately $125 million for property and equipment
We believe that despite active competition, the company has a
significant long-term upside potential based on its disciplined
risk-aware investment approach, which focuses on diversification,
style consistency and fundamental research.
T. Rowe Price's financial stability has the potential to benefit
from the growth opportunities in the domestic and global assets
under management. With a debt-free position, higher return on
earnings and improving investor sentiment witnessed as a whole, we
believe fundamentals will continue to remain strong.
Furthermore, relative mutual fund performance was a positive.
However, higher operating expenses and stringent regulatory norms
could be causes of concern.
Currently, shares of T. Rowe Price retain a Zacks Rank #2 (Buy).
Among other investment managers, Virtus Investment Partners
Inc. ( VRTS ) is expected to
report on Apr 29, 2013, while Invesco Ltd. ( IVZ ) and
Affiliated Managers Group, Inc. ( AMG ) are scheduled to
report on Apr 30, 2013.