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T. Rowe Price Exhibits Stellar Revenues Despite Elevated Costs

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On Sep 7, we issued an updated research report on T. Rowe Price Group, Inc. (TROW - Free Report) . The company’s robust organic growth and initiatives to expand business make us optimistic about its prospects.

Though rising expenses are a major concern, the company’s efforts to gain investor confidence through steady capital-deployment activities are encouraging.

The company’s shares have gained 27.6% in the past six months, outperforming 21.1% growth of the industry it belongs to. Moreover, the Zacks Consensus Estimate for current-year earnings has been revised 0.9% upward over the past 30 days and 1.1% for 2021. This uptrend substantiates its Zacks Rank #1 (Strong Buy).



Looking at the bank’s fundamentals, T. Rowe Price is committed to bolster its business through new investment strategies and vehicles, along with strengthening the company’s distribution channels in the United States, EMEA and Asia Pacific, improving technology platform and deriving long-term cost efficiencies.

Further, organic growth is a key driver at T. Rowe Price, evident from its revenue growth. Net revenues witnessed a CAGR of 7.5% over the last five years (2015-2019), with the increasing trend continuing in the first half of 2020 as well. The company benefits from its diverse business model and the mix shift toward international growth funds is also expected to boost both revenues and investment-management margins.

Moreover, the company’s debt-free position and strong liquidity keep it well poised to undertake strategic investments and growth opportunities in the future. Also, these tailwinds enable it to enhance its shareholder value through efficient capital-deployment activities. This February, the company hiked its quarterly common stock dividend by 18.4%.

Nevertheless, persistently escalating expenses due to T. Rowe Price’s strategic efforts to attract investments from clients might impede its bottom-line growth. Notably, management projects 2020 non-GAAP operating expenses to be up 3-6%. Also, overdependence on investment advisory fees (comprising about 91% of its net revenues) as a revenue source is another major lingering woe.

Stocks to Consider

TD Ameritrade Holding Corporation (AMTD - Free Report) has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #1 Ranked stock has rallied more than 28% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

E*TRADE Financial Corporation has been witnessing upward estimate revisions for the past 60 days. Further, the company’s shares have gained 47.6% in the past six months. At present, it carries a Zacks Rank of 2 (Buy).

Artisan Partners Asset Management Inc. (APAM - Free Report) has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has appreciated 54.5% in six months’ time. It currently sports a Zacks Rank #1.

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