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T. Rowe Price (TROW) Q2 Earnings Beat Estimates, AUM Rises
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T. Rowe Price (TROW - Free Report) has reported second-quarter 2020 adjusted earnings per share of $2.29, which outpaced the Zacks Consensus Estimate of $2.04. The reported figure also climbed 12.8%, year on year.
Results were driven by higher revenues backed by an upsurge in investment advisory fees. Also, assets under management (AUM) improved. However, escalating expenses were an undermining factor.
Including certain non-recurring items, net income was $603 million or $2.55 per share compared with the $527.5 million or $2.15 per share recorded in the prior-year quarter.
Revenues Improve, Expenses Flare Up
Net revenues in the second quarter inched up 1.4% to $1.42 billion from the year-ago quarter. The upswing primarily resulted from higher investment advisory fees, partly offset by lower administrative, distribution and servicing fees. The net revenue figure is in line with the Zacks Consensus Estimate.
Investment advisory fees climbed 1.9% year over year. However, administrative, distribution and servicing fees dipped 2.7% year over year to $121.6 million.
Investment advisory revenues earned from T. Rowe Price mutual funds distributed in the United States were down 4.4% year over year to $823.1 million. Investment advisory revenues earned from other investment portfolios managed by the company increased 10.9% from the prior-year quarter to $511.6 million.
Total adjusted operating expenses flared up 2.8% year over year to $785.8 million in the reported quarter. Rise in headcount and continued investments mainly resulted in this upswing. Including certain one-time items, expenses came in at $861.7 million, up 10.5%.
The company revised expected non-GAAP operating expense growth to 3-6% from 1-4%, on increase in AUM-related expenses.
As of Jun 30, 2020, T. Rowe Price employed 7,527 associates, around 2.2% higher than the prior year.
Assets Grow, Liquidity Position Strong
As of Jun 30, 2020, total AUM grew 8.4% year over year to $1.22 trillion. During the June-end quarter, net market appreciation and gains were $196.7 billion, while net cash inflow was $14.7 billion after client transfers.
T. Rowe Price remains debt free with substantial liquidity, including cash and sponsored portfolio investment holdings of $5.7 billion as of Jun 30, 2020, which enable the company to keep on investing.
Capital-Deployment Activity
During the reported quarter, T. Rowe Price repurchased 1.3 million shares of its common stock for $141.8 million.
For 2020, the company projects capital expenditure of $225 million, comprising more than three-fourth for technology development.
Our Viewpoint
T. Rowe Price put up an impressive show during the April-June quarter on stellar revenues. The company has the potential to benefit from growth in domestic and global AUM. Though higher operating expenses have impacted T. Rowe Price and the pandemic-induced economic slowdown is a major concern, the bank’s debt-free position and higher return on earnings, as a whole, make us confident of its robust fundamentals.
T. Rowe Price Group, Inc. Price, Consensus and EPS Surprise
Franklin Resources Inc. (BEN - Free Report) reported third-quarter fiscal 2020 (ended Jun 30) adjusted earnings of 70 cents per share, comfortably beating the Zacks Consensus Estimate of 53 cents. Results also compared favorably with the earnings of 55 cents per share recorded in the prior-year quarter. The company’s results displayed prudent expense management during the quarter. Also, a strong capital position was a positive. However, lower revenues and AUM were major drags. Additionally, net outflows were an undermining factor.
Cohen & Steers’ (CNS - Free Report) second-quarter 2020 adjusted earnings of 54 cents per share missed the Zacks Consensus Estimate of 55 cents. Moreover, the bottom line came in 12.9% lower than the year-ago reported figure. Results were primarily hurt by a decline in revenues, partly offset by lower expenses. In addition, despite net inflows, the company recorded a fall in AUM balance.
Affiliated Managers Group Inc.’s (AMG - Free Report) second-quarter economic earnings of $2.74 per share surpassed the Zacks Consensus Estimate of $2.70. Nevertheless, the bottom line declined 17.7% year over year. The results reflected lower operating expenses and a robust liquidity position. However, lower revenues, fall in AUM balance and decline in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were headwinds.
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T. Rowe Price (TROW) Q2 Earnings Beat Estimates, AUM Rises
T. Rowe Price (TROW - Free Report) has reported second-quarter 2020 adjusted earnings per share of $2.29, which outpaced the Zacks Consensus Estimate of $2.04. The reported figure also climbed 12.8%, year on year.
Results were driven by higher revenues backed by an upsurge in investment advisory fees. Also, assets under management (AUM) improved. However, escalating expenses were an undermining factor.
Including certain non-recurring items, net income was $603 million or $2.55 per share compared with the $527.5 million or $2.15 per share recorded in the prior-year quarter.
Revenues Improve, Expenses Flare Up
Net revenues in the second quarter inched up 1.4% to $1.42 billion from the year-ago quarter. The upswing primarily resulted from higher investment advisory fees, partly offset by lower administrative, distribution and servicing fees. The net revenue figure is in line with the Zacks Consensus Estimate.
Investment advisory fees climbed 1.9% year over year. However, administrative, distribution and servicing fees dipped 2.7% year over year to $121.6 million.
Investment advisory revenues earned from T. Rowe Price mutual funds distributed in the United States were down 4.4% year over year to $823.1 million. Investment advisory revenues earned from other investment portfolios managed by the company increased 10.9% from the prior-year quarter to $511.6 million.
Total adjusted operating expenses flared up 2.8% year over year to $785.8 million in the reported quarter. Rise in headcount and continued investments mainly resulted in this upswing. Including certain one-time items, expenses came in at $861.7 million, up 10.5%.
The company revised expected non-GAAP operating expense growth to 3-6% from 1-4%, on increase in AUM-related expenses.
As of Jun 30, 2020, T. Rowe Price employed 7,527 associates, around 2.2% higher than the prior year.
Assets Grow, Liquidity Position Strong
As of Jun 30, 2020, total AUM grew 8.4% year over year to $1.22 trillion. During the June-end quarter, net market appreciation and gains were $196.7 billion, while net cash inflow was $14.7 billion after client transfers.
T. Rowe Price remains debt free with substantial liquidity, including cash and sponsored portfolio investment holdings of $5.7 billion as of Jun 30, 2020, which enable the company to keep on investing.
Capital-Deployment Activity
During the reported quarter, T. Rowe Price repurchased 1.3 million shares of its common stock for $141.8 million.
For 2020, the company projects capital expenditure of $225 million, comprising more than three-fourth for technology development.
Our Viewpoint
T. Rowe Price put up an impressive show during the April-June quarter on stellar revenues. The company has the potential to benefit from growth in domestic and global AUM. Though higher operating expenses have impacted T. Rowe Price and the pandemic-induced economic slowdown is a major concern, the bank’s debt-free position and higher return on earnings, as a whole, make us confident of its robust fundamentals.
T. Rowe Price Group, Inc. Price, Consensus and EPS Surprise
T. Rowe Price Group, Inc. price-consensus-eps-surprise-chart | T. Rowe Price Group, Inc. Quote
Currently, the company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Investment Managers
Franklin Resources Inc. (BEN - Free Report) reported third-quarter fiscal 2020 (ended Jun 30) adjusted earnings of 70 cents per share, comfortably beating the Zacks Consensus Estimate of 53 cents. Results also compared favorably with the earnings of 55 cents per share recorded in the prior-year quarter. The company’s results displayed prudent expense management during the quarter. Also, a strong capital position was a positive. However, lower revenues and AUM were major drags. Additionally, net outflows were an undermining factor.
Cohen & Steers’ (CNS - Free Report) second-quarter 2020 adjusted earnings of 54 cents per share missed the Zacks Consensus Estimate of 55 cents. Moreover, the bottom line came in 12.9% lower than the year-ago reported figure. Results were primarily hurt by a decline in revenues, partly offset by lower expenses. In addition, despite net inflows, the company recorded a fall in AUM balance.
Affiliated Managers Group Inc.’s (AMG - Free Report) second-quarter economic earnings of $2.74 per share surpassed the Zacks Consensus Estimate of $2.70. Nevertheless, the bottom line declined 17.7% year over year. The results reflected lower operating expenses and a robust liquidity position. However, lower revenues, fall in AUM balance and decline in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were headwinds.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained an impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>