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T. Rowe Price Group (TROW)

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We are upgrading our recommendation on T. Rowe Price Group (TROW) to Outperform from Neutral based on the company's debt-free position and steady profit trend. The company's fourth-quarter 2011 earnings outshined the Zacks Consensus Estimate. Moreover, earnings also compared favorably with the prior-year quarter.

Higher-than-expected top-line growth and increased assets under management (AUM) assisted the improved performance. Furthermore, relative mutual fund performance was also positive. Higher operating expenses were on the downside.

The company has the potential to take advantage of the economic recovery and benefit from the growth opportunities in the domestic and global AUM. Our six-month target price of $70.00 equates to about 20.8x our earnings estimate for 2012. Combined with the $1.36 per share annual dividend, this price target implies an expected return of 13.9% over that period.

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