T. Rowe Price Group, Inc. (TROW - Free Report) reported second-quarter 2018 adjusted earnings per share of $1.87, improving 46.1% from the year-ago figure of $1.28. The Zacks Consensus Estimate was $1.80.
Results were driven by higher revenues and assets under management (AUM). However, escalating expenses were a concern.
Including certain non-recurring items, net income came in at $448.9 million or $1.77 per share compared with $373.9 million or $1.50 per share recorded in the prior-year quarter.
Revenues Improve, Expenses Flare Up
Net revenues rose 13.4% to $1.35 billion from the year-ago quarter. The rise primarily stemmed from higher investment advisory fees that grew 16.1% year over year to $1.21 billion. Moreover, the net revenue figure surpassed the Zacks Consensus Estimate of $1.33 billion.
Administrative, distribution and servicing fees declined 6.7% year over year to $130.6 million.
Investment advisory revenues earned from the T. Rowe Price mutual funds, distributed in the United States, were up 12% year over year to $846.9 million. Investment advisory revenues earned from other investment portfolios, managed by the company, rose 26.9% from the prior-year quarter to $367.5 million.
Total adjusted operating expenses flared up 10.1% year over year to $750.3 million in the second quarter. Rise in almost all components of expenses resulted in this upsurge. Including certain one-time items, expenses were $664.0 million, up 10.6%.
As of Jun 30, 2018, T. Rowe Price employed 6,936 associates, around 1% higher than the last year.
Strong Assets Position
As of Jun 30, 2018, total AUM climbed 15.5% year over year to $1.04 trillion. During the April-June quarter, net market appreciation and income, came in at $22.9 billion, while net cash inflow was $7.6 billion after client transfers.
T. Rowe Price remains debt free with substantial liquidity, including cash and sponsored portfolio investment holdings of about $3.2 billion as of Jun 30, 2018, which enable the company to keep on investing.
Capital-Deployment Activity
During second-quarter 2018, T. Rowe Price repurchased 1.3 million shares of its common stock for $136.9 million, and invested $78.6 million during the first half of 2018 in capitalized technology and facilities using available cash balances.
For 2018, the company projects capital expenditures to be approximately $189 million, comprising two-third for technology development.
Our Viewpoint
T. Rowe Price’s financial stability has the potential to benefit from growth opportunities in domestic and global AUM. The company’s debt-free position, higher return on earnings and improvement in investor sentiment, as a whole, makes us confident of its robust fundamentals, moving ahead. Furthermore, a relatively better mutual fund performance is a positive.
Nonetheless, higher operating expenses remain concerns.
Currently, T. Rowe Price carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other investment managers, Federated Investors, Inc. and Lazard Ltd. (LAZ - Free Report) are scheduled to report June quarter-end results on Jul 26, while Franklin Resources, Inc. (BEN - Free Report) will release its quarterly numbers on Jul 27.
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T. Rowe Price Group, Inc. (TROW - Free Report) reported second-quarter 2018 adjusted earnings per share of $1.87, improving 46.1% from the year-ago figure of $1.28. The Zacks Consensus Estimate was $1.80.
Results were driven by higher revenues and assets under management (AUM). However, escalating expenses were a concern.
Including certain non-recurring items, net income came in at $448.9 million or $1.77 per share compared with $373.9 million or $1.50 per share recorded in the prior-year quarter.
Revenues Improve, Expenses Flare Up
Net revenues rose 13.4% to $1.35 billion from the year-ago quarter. The rise primarily stemmed from higher investment advisory fees that grew 16.1% year over year to $1.21 billion. Moreover, the net revenue figure surpassed the Zacks Consensus Estimate of $1.33 billion.
Administrative, distribution and servicing fees declined 6.7% year over year to $130.6 million.
Investment advisory revenues earned from the T. Rowe Price mutual funds, distributed in the United States, were up 12% year over year to $846.9 million. Investment advisory revenues earned from other investment portfolios, managed by the company, rose 26.9% from the prior-year quarter to $367.5 million.
Total adjusted operating expenses flared up 10.1% year over year to $750.3 million in the second quarter. Rise in almost all components of expenses resulted in this upsurge. Including certain one-time items, expenses were $664.0 million, up 10.6%.
As of Jun 30, 2018, T. Rowe Price employed 6,936 associates, around 1% higher than the last year.
Strong Assets Position
As of Jun 30, 2018, total AUM climbed 15.5% year over year to $1.04 trillion. During the April-June quarter, net market appreciation and income, came in at $22.9 billion, while net cash inflow was $7.6 billion after client transfers.
T. Rowe Price remains debt free with substantial liquidity, including cash and sponsored portfolio investment holdings of about $3.2 billion as of Jun 30, 2018, which enable the company to keep on investing.
Capital-Deployment Activity
During second-quarter 2018, T. Rowe Price repurchased 1.3 million shares of its common stock for $136.9 million, and invested $78.6 million during the first half of 2018 in capitalized technology and facilities using available cash balances.
For 2018, the company projects capital expenditures to be approximately $189 million, comprising two-third for technology development.
Our Viewpoint
T. Rowe Price’s financial stability has the potential to benefit from growth opportunities in domestic and global AUM. The company’s debt-free position, higher return on earnings and improvement in investor sentiment, as a whole, makes us confident of its robust fundamentals, moving ahead. Furthermore, a relatively better mutual fund performance is a positive.
Nonetheless, higher operating expenses remain concerns.
Currently, T. Rowe Price carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other investment managers, Federated Investors, Inc. and Lazard Ltd. (LAZ - Free Report) are scheduled to report June quarter-end results on Jul 26, while Franklin Resources, Inc. (BEN - Free Report) will release its quarterly numbers on Jul 27.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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