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Will High Costs Dampen T. Rowe Price (TROW) Q2 Earnings?
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T. Rowe Price Group, Inc. (TROW - Free Report) is scheduled to report second-quarter 2018 results, before the opening bell on Jul 25, with 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 AUM were the positive factors.
Further, T. Rowe Price recorded positive earnings surprise in three out of the trailing four quarters, delivering an average beat of 6.56%.
However, activities of the company in the second quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $1.80 remained unchanged over the last seven days. Also, the figure indicates year-over-year rise of 20%.
The Zacks Consensus Estimate for sales of $1.3 billion for the quarter also reflects a jump of 13.86% from the year-ago quarter.
Let’s see how things have shaped up for this announcement.
Earnings Whispers
According to our proven model, we cannot conclusively predict if T. Rowe Price will likely beat estimates this time. That’s because it doesn’t have 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.
Zacks ESP: The company has an Earnings ESP of 0.00%.
Zacks Rank: T. Rowe Price currently carries a Zacks Rank of 2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.
Factors to Influence Q2 Results
Expenses to Escalate: The company did not point out anything related to its cost-control initiatives during the second quarter. It incurs significant expenditures to attract new investment advisory clients and additional investments from existing clients. Further, T. Rowe Price projects operating expenses to flare up in the range of 8-11% in 2018. Notably, the company anticipates capital expenditures in the current year to be approximately $180 million, including two-third for technology development.
Overall Inflows Expected: According to the Morningstar data, T. Rowe Price witnessed around $9 billion of net inflows on a combined basis being inflows in U.S. mutual fund products and net inflows excluding transfers to other portfolios in Q2.
Furthermore, the performance of equity markets was favorable in the second quarter, with the S&P 500 index increasing 2.9% sequentially. Therefore, the company’s results will likely reflect a rise in assets under management (AUM) on overall inflows.
Revenue Growth: T. Rowe Price’s efforts to improve its operating efficiency have resulted in year-over-year top-line growth over the past few years. We believe the company is well poised to sustain this upbeat uptrend, in the near term. This comes on the back of several planned initiatives largely tied with launching investment strategies and vehicles, enhancing client-engagement capabilities in each distribution channel, strengthening distribution channel in the United States, EMEA, and the Asia Pacific, and improving its technology platform and deriving long-term cost efficiencies.
Stocks that Warrant a Look
Here are some 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.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.89% and holds a Zacks Rank of 2. It is slated to report results on Jul 26.
Legg Mason, Inc. has an Earnings ESP of +1.22% and carries a Zacks Rank #3. It is set to report June quarter-end results on Jul 25.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Will High Costs Dampen T. Rowe Price (TROW) Q2 Earnings?
T. Rowe Price Group, Inc. (TROW - Free Report) is scheduled to report second-quarter 2018 results, before the opening bell on Jul 25, with 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 AUM were the positive factors.
Further, T. Rowe Price recorded positive earnings surprise in three out of the trailing four quarters, delivering an average beat of 6.56%.
T. Rowe Price Group, Inc. Price and EPS Surprise
T. Rowe Price Group, Inc. Price and EPS Surprise | T. Rowe Price Group, Inc. Quote
However, activities of the company in the second quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $1.80 remained unchanged over the last seven days. Also, the figure indicates year-over-year rise of 20%.
The Zacks Consensus Estimate for sales of $1.3 billion for the quarter also reflects a jump of 13.86% from the year-ago quarter.
Let’s see how things have shaped up for this announcement.
Earnings Whispers
According to our proven model, we cannot conclusively predict if T. Rowe Price will likely beat estimates this time. That’s because it doesn’t have 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.
Zacks ESP: The company has an Earnings ESP of 0.00%.
Zacks Rank: T. Rowe Price currently carries a Zacks Rank of 2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.
Factors to Influence Q2 Results
Expenses to Escalate: The company did not point out anything related to its cost-control initiatives during the second quarter. It incurs significant expenditures to attract new investment advisory clients and additional investments from existing clients. Further, T. Rowe Price projects operating expenses to flare up in the range of 8-11% in 2018. Notably, the company anticipates capital expenditures in the current year to be approximately $180 million, including two-third for technology development.
Overall Inflows Expected: According to the Morningstar data, T. Rowe Price witnessed around $9 billion of net inflows on a combined basis being inflows in U.S. mutual fund products and net inflows excluding transfers to other portfolios in Q2.
Furthermore, the performance of equity markets was favorable in the second quarter, with the S&P 500 index increasing 2.9% sequentially. Therefore, the company’s results will likely reflect a rise in assets under management (AUM) on overall inflows.
Revenue Growth: T. Rowe Price’s efforts to improve its operating efficiency have resulted in year-over-year top-line growth over the past few years. We believe the company is well poised to sustain this upbeat uptrend, in the near term. This comes on the back of several planned initiatives largely tied with launching investment strategies and vehicles, enhancing client-engagement capabilities in each distribution channel, strengthening distribution channel in the United States, EMEA, and the Asia Pacific, and improving its technology platform and deriving long-term cost efficiencies.
Stocks that Warrant a Look
Here are some 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 is +1.26% and the stock carries a Zacks Rank of 2. The company is scheduled to release second-quarter results on Jul 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.89% and holds a Zacks Rank of 2. It is slated to report results on Jul 26.
Legg Mason, Inc. has an Earnings ESP of +1.22% and carries a Zacks Rank #3. It is set to report June quarter-end results on Jul 25.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>