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Strong Equity Markets to Aid T. Rowe Price (TROW) Q3 Earnings

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T. Rowe Price Group, Inc. (TROW - Free Report) is scheduled to report third-quarter 2019 results, before the opening bell on Oct 24. The company’s revenues are projected to increase year over year, while earnings might display a decline.

In the last reported quarter, T. Rowe Price outpaced the Zacks Consensus Estimate, driven by higher AUM and revenues. However, escalating expenses were a concern.

T. Rowe Price recorded positive earnings surprise in three out of the trailing four quarters, delivering an average beat of 6.03%.

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

Further, the company’s activities in the third quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $1.98 remained unchanged, over the last seven days. The figure indicates a year-over-year decrease of 13.9%.

The Zacks Consensus Estimate for sales of $1.44 billion for the quarter reflects an increase of 3.2% from the year-ago quarter’s reported figure.

Let’s see how things have shaped up for this announcement.

The company does not have the combination of the two key ingredients for a possible earnings beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold).

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 currently pegged at 0.00%.

Zacks Rank: T. Rowe Price currently carries a Zacks Rank of 3, which increases the predictive power of ESP. But we need to have positive earnings ESP to be sure of an earnings beat.

Factors at Play

Overall Inflows Likely: T. Rowe Price is likely to report net inflows on a combined basis, being outflows in U.S. mutual fund products and net inflows excluding transfers to other portfolios in the third quarter.

Furthermore, the performance of equity markets was impressive in the quarter, with the S&P 500 Index increasing 1.7% sequentially. Therefore, the company’s results will likely reflect a rise in assets under management (AUM) on overall inflows.

Notably, the Zacks Consensus Estimate for AUM is pinned at $1.14 billion, up around 1% sequentially, while net cash inflows are projected at $3.1 billion, up 24% sequentially.

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

Expenses Escalate: The company did not point out anything related to its cost-control initiatives during the September-end period. It incurs significant expenditures to attract new investment advisory clients and additional investments from existing clients. T. Rowe Price expects 4-7% expense rise this year. Notably, the company anticipates capital expenditures in the ongoing year to be approximately $200 million, including two-third for technology development. Therefore, impact of such anticipations might reflected in the to-be-reported quarter’s results as well.

Stocks that Warrant a Look

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

Federated Investors, Inc. (FII - Free Report) is slated to release results on Oct 24. The company has an Earnings ESP of +0.76% and carries a Zacks Rank of 3, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cullen/Frost Bankers, Inc. (CFR - Free Report) is set to release earnings on Oct 31. The company has an Earnings ESP of +0.07% and currently carries a Zacks Rank of 3.

Huntington Bancshares Incorporated (HBAN - Free Report) has an Earnings ESP of +0.60% and at present, holds a Zacks Rank of 3. It is scheduled to report quarterly figures on Oct 24.

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