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Why Is T. Rowe (TROW) Down 0.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for T. Rowe Price (TROW - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is T. Rowe due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
T. Rowe Price Q4 Earnings Beat Estimates, Revenues Up
T. Rowe Price delivered fourth-quarter 2020 adjusted earnings per share of $2.89, which outpaced the Zacks Consensus Estimate of $2.68. The reported figure also climbed 42.4%, year on year.
Results were driven by higher revenues, backed by an upsurge in investment advisory fees. Also, AUM improved. However, escalating expenses were an undermining factor.
Including certain non-recurring items, net income was $783.4 million or $3.33 per share compared with the $545.3 million or $2.24 per share recorded in the prior-year quarter.
For full-year 2020, the company reported adjusted net income of $2.28 billion or $9.58 per share as against the year-ago income of $1.98 billion or $8.07 per share. The bottom line also beat the Zacks Consensus Estimate of $9.33.
Revenues Improve, Expenses Flare Up
For full-year 2020, net revenues came in at $6.21 billion, up 10.5% year on year. This upside was primarily driven by an increase in investment advisory fees. Moreover, net revenues outpaced the Zacks Consensus Estimate of $6.18 billion.
Net revenues in the fourth quarter increased 18% to $1.73 billion from the year-ago quarter. This upswing primarily resulted from higher investment advisory fees, along with elevated administrative, distribution and servicing fees. The net revenue figure also surpassed the Zacks Consensus Estimate of $1.71 billion.
Investment advisory fees climbed 19.1% year over year to $1.6 billion. Additionally, administrative, distribution and servicing fees jumped 5.4% year over year to $130.7 million.
Investment advisory revenues earned from T. Rowe Price mutual funds distributed in the United States were up 11.9% year over year to $1 billion. Investment advisory revenues earned from other investment portfolios managed by the company increased 33.6% from the prior-year quarter to $601.1 million.
Total adjusted operating expenses flared up 5.2% year on year to $908.5 million in the reported quarter. Including certain one-time items, expenses came in at $977 million, up 10%. Rise in compensation and related costs, along with distribution and servicing, mainly resulted in this uptick.
As of Dec 31, 2020, T. Rowe Price employed 7,678 associates, 4.2% higher than the prior year.
Assets Grow, Liquidity Position Strong
As of Dec 31, 2020, total AUM increased 21.9% year over year to $1.47 trillion. During the December-end quarter, net market appreciation and gains were $160.6 billion, while net cash inflow was $2.2 billion after client transfers.
T. Rowe Price remains debt free with substantial liquidity, including cash and sponsored portfolio investment holdings of $6.2 billion as of Dec 31, 2020, which enable the company to keep on investing.
Capital Deployment Activity
During 2020, T. Rowe Price repurchased 10.9 million shares of its common stock for a total cost of $1.2 billion and at an average cost of $109.3, and invested $214.6 million in capitalized technology and facilities using available cash balances.
During the reported quarter, T. Rowe Price repurchased 145, 247 shares of its common stock for $21.5 million.
For 2021, the company projects capital expenditure of $265 million, comprising more than three-fourth for technology development.
Outlook
For 2021, the company revised projected non-GAAP operating expense rise to 8-12% from 6-9% on elevated AUM-related expenses.
T. Rowe Price estimates effective tax rate for full-year 2021 on a non-GAAP basis in the range of 23% to 25%, while on a GAAP basis, it is projected at 22-25%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, T. Rowe has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise T. Rowe has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is T. Rowe (TROW) Down 0.2% Since Last Earnings Report?
It has been about a month since the last earnings report for T. Rowe Price (TROW - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is T. Rowe due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
T. Rowe Price Q4 Earnings Beat Estimates, Revenues Up
T. Rowe Price delivered fourth-quarter 2020 adjusted earnings per share of $2.89, which outpaced the Zacks Consensus Estimate of $2.68. The reported figure also climbed 42.4%, year on year.
Results were driven by higher revenues, backed by an upsurge in investment advisory fees. Also, AUM improved. However, escalating expenses were an undermining factor.
Including certain non-recurring items, net income was $783.4 million or $3.33 per share compared with the $545.3 million or $2.24 per share recorded in the prior-year quarter.
For full-year 2020, the company reported adjusted net income of $2.28 billion or $9.58 per share as against the year-ago income of $1.98 billion or $8.07 per share. The bottom line also beat the Zacks Consensus Estimate of $9.33.
Revenues Improve, Expenses Flare Up
For full-year 2020, net revenues came in at $6.21 billion, up 10.5% year on year. This upside was primarily driven by an increase in investment advisory fees. Moreover, net revenues outpaced the Zacks Consensus Estimate of $6.18 billion.
Net revenues in the fourth quarter increased 18% to $1.73 billion from the year-ago quarter. This upswing primarily resulted from higher investment advisory fees, along with elevated administrative, distribution and servicing fees. The net revenue figure also surpassed the Zacks Consensus Estimate of $1.71 billion.
Investment advisory fees climbed 19.1% year over year to $1.6 billion. Additionally, administrative, distribution and servicing fees jumped 5.4% year over year to $130.7 million.
Investment advisory revenues earned from T. Rowe Price mutual funds distributed in the United States were up 11.9% year over year to $1 billion. Investment advisory revenues earned from other investment portfolios managed by the company increased 33.6% from the prior-year quarter to $601.1 million.
Total adjusted operating expenses flared up 5.2% year on year to $908.5 million in the reported quarter. Including certain one-time items, expenses came in at $977 million, up 10%. Rise in compensation and related costs, along with distribution and servicing, mainly resulted in this uptick.
As of Dec 31, 2020, T. Rowe Price employed 7,678 associates, 4.2% higher than the prior year.
Assets Grow, Liquidity Position Strong
As of Dec 31, 2020, total AUM increased 21.9% year over year to $1.47 trillion. During the December-end quarter, net market appreciation and gains were $160.6 billion, while net cash inflow was $2.2 billion after client transfers.
T. Rowe Price remains debt free with substantial liquidity, including cash and sponsored portfolio investment holdings of $6.2 billion as of Dec 31, 2020, which enable the company to keep on investing.
Capital Deployment Activity
During 2020, T. Rowe Price repurchased 10.9 million shares of its common stock for a total cost of $1.2 billion and at an average cost of $109.3, and invested $214.6 million in capitalized technology and facilities using available cash balances.
During the reported quarter, T. Rowe Price repurchased 145, 247 shares of its common stock for $21.5 million.
For 2021, the company projects capital expenditure of $265 million, comprising more than three-fourth for technology development.
Outlook
For 2021, the company revised projected non-GAAP operating expense rise to 8-12% from 6-9% on elevated AUM-related expenses.
T. Rowe Price estimates effective tax rate for full-year 2021 on a non-GAAP basis in the range of 23% to 25%, while on a GAAP basis, it is projected at 22-25%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, T. Rowe has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise T. Rowe has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.