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Will Solid Equity Markets Aid T. Rowe Price (TROW) Q1 Earnings?

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T. Rowe Price Group, Inc. (TROW - Free Report) is scheduled to report first-quarter 2021 results, before the bell on Apr 29. The company’s revenues and earnings are projected to reflect year-over-year increases.

In the last reported quarter, T. Rowe Price’s earnings outpaced the Zacks Consensus Estimate on higher assets under management (AUM) and investment advisory fees. However, escalating expenses were a concern.

The company delivered earnings surprises in all of the last four quarters, the average beat being 5.49%.

Notably, the company’s activities in the first quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate of $2.90 for first-quarter earnings moved north over the past 30 days. The figure indicates a year-over-year jump of 55.08%.

The Zacks Consensus Estimate for quarterly sales is pegged at $1.8 billion, suggesting an increase of 22.84% year over year.

Factors at Play

Overall Inflows Likely:  T. Rowe Price is likely to have witnessed net inflows on a combined basis, having recorded inflows in fixed income products, partly offset by continued outflows in other investment portfolios during the to-be-reported quarter. Furthermore, equity markets put up an encouraging performance during the quarter under review, with the S&P 500 Index rallying 5.8% sequentially. Therefore, the company’s results will likely reflect an increase in AUM on overall inflows and favorable market returns.

The Zacks Consensus Estimate of $1.66 billion for investment management fees calls for a 3.7% quarter-on-quarter rise. Also, the Zacks Consensus Estimate of administrative, service and distribution fees of $133 million suggests a 1.6% sequential increase.

Notably, the Zacks Consensus Estimate for AUM is pinned at $1.52 billion, up 9% on a sequential basis, while net cash inflows are projected at $2.84 billion compared with the inflows of $2.2 billion recorded in the prior quarter.

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 encouraging uptrend in the near term as well.

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 boosting its technology platform and deriving long-term cost efficiencies.

Rising Expenses: T. Rowe Price has not updated on anything related to its cost-control initiatives during the January-March period. The bank incurs significant expenditures to attract new investment advisory clients and additional investments from existing clients. T. Rowe Price projects non-GAAP operating expense to flare up 8-12% in 2021. Therefore, the quarterly results might reflect the impact of such projections.

Here is what our quantitative model predicts:

T. Rowe Price has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing 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.

Earnings ESP: The Earnings ESP for the stock is +0.57%.

Zacks Rank: T. Rowe Price currently carries a Zacks Rank of 2 (Buy).

T. Rowe Price Group, Inc. Price and EPS Surprise

T. Rowe Price Group, Inc. Price and EPS Surprise

T. Rowe Price Group, Inc. price-eps-surprise | T. Rowe Price Group, Inc. Quote

Other Stocks that Warrant a Look

Here are a few other stocks you may want to consider, as according to our model these too have the right combination of elements to post an earnings beat this quarter.

Ameriprise Financial, Inc. (AMP - Free Report) is scheduled to release first-quarter results on May 6. The company currently has an Earnings ESP of +0.74% and carries a Zacks Rank of 2.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Prosperity Bancshares, Inc. (PB - Free Report) is slated to report quarterly figures on Apr 28. The company currently has an Earnings ESP of +2.56% and holds a Zacks Rank of 3.

Carlyle Group (CG - Free Report) is set to announce earnings figures on Apr 29. The company currently has an Earnings ESP of +1.46% and carries a Zacks Rank of 3, at present.

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