Will Higher AUM Support T. Rowe Price's (TROW) Q3 Earnings?

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T. Rowe Price GroupTROW is scheduled to report third-quarter 2018 results, before the opening bell on Oct 25. Its revenues and earnings projected to improve year over year.

In the last reported quarter, T. Rowe Price lagged the Zacks Consensus Estimate, reflecting higher expenses. However, top-line strength and higher assets under management (AUM) were the positive factors.

Further, the company has a decent earnings surprise history. It delivered a positive earnings surprise in two of the trailing four quarters with an average beat of 2.6%.

T. Rowe Price Group, Inc. Price and EPS Surprise

T. Rowe Price Group, Inc. Price and EPS Surprise | T. Rowe Price Group, Inc. Quote

Notably, activities of the company in the third quarter were adequate to win analysts' confidence. As a result, the Zacks Consensus Estimate for earnings of $1.93 has been raised 1.6% over the past 30 days. Also, the figure indicates year-over-year rise of 23.7%.

The consensus estimate for sales of $1.38 billion for the quarter reflects a jump of 13.3%.

Let's see how things have shaped up for this announcement.

Why a Likely Positive Surprise

According to our proven model, we can conclusively predict that T. Rowe Price is likely to beat estimates this time. That's because it has the right combination of the two key ingredients - positive Earnings ESP and a Zacks Rank #3 (Hold) or better - to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Earnings ESP: The company has an Earnings ESP of +0.78%.

Zacks Rank: T. Rowe Price currently carries a Zacks Rank of 2 (Buy).

Factors to Influence Q3 Results

Revenue Might Grow: T. Rowe Price's efforts to improve its operating efficiency have resulted in top-line growth over the past few years. We believe the company is well poised to sustain this uptrend in the near term.

Also, higher AUM as indicated by the company's monthly reports will lend support to top-line growth.

Overall Inflows Expected: T. Rowe Price witnessed net inflows from total sponsored U.S. mutual fund products, excluding transfers to other portfolios in third quarter. Furthermore, the performance of equity markets was favorable in the quarter with the S&P 500 Index gaining more than 6% sequentially. Therefore, the company's results will likely reflect a rise in AUM on overall inflows.

Expenses to Escalate: The company incurs significant expenditures to attract new investment advisory clients and additional investments from existing clients. Further, T. Rowe Price expects operating expenses to flare up in the range of 8-11% in 2018. Notably, the company anticipates capital expenditures for the current year to be approximately $180 million, including two-third for technology development.

Other Stocks That Warrant a Look

Here are some other stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for SVB Financial Group SIVB is +1.22% and it sports a Zacks Rank #1 (Strong Buy). The company is scheduled to release third-quarter results on Oct 25. You can see the complete list of today's Zacks #1 Rank stocks here .

Cullen/Frost Bankers, Inc. CFR has an Earnings ESP of +0.07% and holds a Zacks Rank of 3. It is slated to report results on Oct 25.

Franklin Resources, Inc. BEN is slated to release results on Oct 25. The company has an Earnings ESP of +0.68% and carries a Zacks Rank of 3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: CFR , SIVB , TROW , BEN

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