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Will Inflows Support T. Rowe Price's (TROW) Q2 Earnings?

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T. Rowe Price Group, Inc. (TROW - Free Report) is scheduled to report second-quarter 2021 results, before the bell on Jul 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 an undermining factor.

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

The company delivered earnings surprises in all of the last four quarters, the average beat being 5.99%.

Notably, the company’s activities in the second quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate of $3.17 for quarterly earnings moved north over the past 30 days. The figure indicates a year-over-year jump of 38.43%.

The Zacks Consensus Estimate for quarterly revenues is pegged at $1.89 billion, suggesting an increase of 33.60% year over year.

Factors at Play

Overall Inflows Likely:  Despite an overall challenging operating backdrop amid the coronavirus pandemic, T. Rowe Price is likely to have witnessed decent asset inflows, having recorded inflows in fixed income products. Unlike the previous few quarters, the second quarter did not record a significant rise in market volatility. However, despite relatively low volatility and market normalization, client activity was decent during the period in discussion. Therefore, the company’s results will likely reflect an increase in AUM on overall inflows and decent client activities.

Revenue Growth: T. Rowe Price’s efforts to boost its operating efficiency have resulted in year-over-year top-line growth in the past few years. We believe this encouraging uptrend to have sustained in the second quarter as well on the company’s solid position.

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

Rising Expenses:  The company incurs significant expenditures to attract new investment advisory clients and additional investments from existing clients. Management projects 2021 non-GAAP operating expenses to flare up 10-14%. Also, it expects capital expenditures for 2021 to be about $265 million. Such uptrend in expenses might keep affecting bottom-line expansion. 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 +1.34%.

Zacks Rank: T. Rowe Price currently carries a Zacks Rank of 3.

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 second-quarter results on Jul 27. The company currently has an Earnings ESP of +1.31% and carries a Zacks Rank of 2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Prosperity Bancshares (PB - Free Report) is +1.52% and the stock carries a Zacks Rank #2, at present. The company is slated to report quarterly numbers on Jul 28.

Evercore (EVR - Free Report) is slated to report quarterly results on Jul 28. The company currently has an Earnings ESP of +4.84% and carries a Zacks Rank of 2.