On Jun 11, 2014, we issued an updated research report on T. Rowe Price Group Inc. (TROW). This investment management company recently reported impressive first-quarter 2014 results. Results were aided by top-line growth, a strong capital position and improved assets under management (AUM.TO), partially offset by higher operating expenses. Though the company shows stability in its fundamentals, we remain cautious due to the current economic uncertainty across the industry.
T. Rowe Price reported first-quarter 2014 earnings of $1.05 per share, beating the Zacks Consensus Estimate by 2.94%. Moreover, earnings came above the prior-year quarter earnings by 15.4%.
The company exhibited a decent performance in the last four quarters as evident from its earnings history. T. Rowe Price posted positive earnings surprises in 3 of the 4 quarters with an average beat of 1.47%.
Organic growth remains a key strength at T. Rowe Price, as reflected by its revenue growth story. Net revenues increased 17% year over year in first-quarter 2014, following a CAGR of 16.9% over the last five years (2009–2013). We believe the company is well positioned to maintain this trend going forward.
T. Rowe Price is an attractive asset for yield-seeking investors due to its strong capital deployment activity. In Feb 2014, T. Rowe Price’s board of directors approved a 16.0% hike in the company’s quarterly common stock dividend. This marks T. Rowe Price’s 28th consecutive annual dividend increase, reflecting the company’s commitment to return value to shareholders. Notably, in first-quarter 2014, the company paid $115.8 million in regular dividends and repurchased common stock worth $31.3 million.
Despite strong fundamentals, we believe there are certain issues that may create pressure on the company’s financials in the near term. These include elevated operating expenses and cyclical and secular pressures in the asset management business.
For 2014, the Zacks Consensus Estimate over the past 60 days surged 2.9% to $4.58 per share. Also, for 2015 it increased 1.8% to $5.06 per share, over the same time frame.
T. Rowe Price currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better ranked investment management companies include Cohen & Steers Inc. (CNS) and Woori Finance Holdings Co., Ltd. (WF) with a Zacks Rank #1 (Strong Buy), while Ameriprise Financial, Inc. (AMP) carries a Zacks Rank #2 (Buy).