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T. Rowe Price (TROW) Q2 Earnings Beat Estimates, AUM Rises

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T. Rowe Price (TROW - Free Report) reported second-quarter 2021 adjusted earnings per share of $3.31, which outpaced the Zacks Consensus Estimate of $3.21. The reported figure also climbed 44.5% year over year.

Results were driven by higher revenues, backed by an increase in investment advisory fees. Also, assets under management (AUM) improved. However, escalating expenses were an undermining factor.

Including certain non-recurring items, net income came in at $815.7 million or $3.46 per share compared with the $603 million or $2.55 per share recorded in the prior-year quarter.

Revenues Improve, Expenses Up

Net revenues in the second quarter increased 36.3% to $1.93 billion from the year-ago quarter. This upswing primarily resulted from higher investment advisory, and administrative, distribution and servicing fees. The reported figure also surpassed the Zacks Consensus Estimate by 0.86%.

Investment advisory fees climbed 38% year over year to $1.78 billion. Additionally, administrative, distribution and servicing fees jumped 16.9% to $142.1 million.

Investment advisory revenues earned from T. Rowe Price mutual funds distributed in the United States were up 33.3% year over year to $1.1 billion. Investment advisory revenues earned from other investment portfolios managed by the company increased 46.5% from the prior-year quarter to 689.7 million.

Total adjusted operating expenses flared up 18.6% year over year to $931.8 million in the reported quarter. Including certain one-time items, expenses came in at $971.2 million, up 12.7%. Rise in interim bonus accrual, salaries and benefits, partially offset by lower compensation expenses, mainly resulted in this uptick.

As of Jun 30, 2021, T. Rowe Price employed 7,804 associates, 3.7% higher than the prior year.

Assets Grow, Liquidity Position Strong

As of Jun 30, 2021, total AUM rose 33% year over year to $1.62 trillion. During the June-end quarter, net market appreciation and gains were $105.9 billion, while net cash inflow was $0.6 billion after client transfers.

T. Rowe Price remained debt free with substantial liquidity, including cash and cash investments of $7.48 billion as of Jun 30, 2021. This will enable the company to keep investing.

Capital Deployment Activity

During the reported quarter, T. Rowe Price repurchased 0.2 million shares of its common stock for $41.3 million, at an average price of $166.57.

Our Viewpoint

T. Rowe Price put up an impressive show during the June-end period on stellar revenues. The company has the potential to benefit from growth in domestic and global AUM. Though higher operating expenses unfavorably impacted T. Rowe Price and the pandemic-induced economic slowdown is a major concern, the bank’s debt-free position and higher return on earnings, as a whole, make us confident of its robust fundamentals.

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

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

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

Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Investment Managers

BlackRock, Inc.’s (BLK - Free Report) second-quarter 2021 adjusted earnings of $10.03 per share outpaced the Zacks Consensus Estimate of $9.24. The reported figure reflected a rise of 27.8 % from the year-ago quarter’s number.

Blackstone’s (BX - Free Report) second-quarter 2021 distributable earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 80 cents. The figure marked a 90.7% jump from the prior-year period.

SEI Investments Co.’s (SEIC - Free Report) second-quarter 2021 earnings of 93 cents per share topped the Zacks Consensus Estimate by a penny. The bottom line reflected 37% growth from the prior-year quarter.