Is an Earnings Beat in Store for T. Rowe Price (TROW) in Q4?
T. Rowe Price Group, Inc. TROW is scheduled to report fourth-quarter and 2022 results before the opening bell on Jan 26. TROW’s quarterly earnings and revenues are projected to have declined from the year-ago reported figures.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Net revenues declined because of a fall in assets under management (AUM) and investment advisory fees.
T. Rowe Price does not have an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in two and lagged in two of the trailing four quarters.
T. Rowe Price Group, Inc. Price and EPS Surprise
T. Rowe Price Group, Inc. price-eps-surprise | T. Rowe Price Group, Inc. Quote
TROW’s activities in the to-be-reported quarter won analysts’ confidence. As a result, the Zacks Consensus Estimate for the company’s fourth-quarter earnings of $1.73 per share has moved 1.2% upward over the past seven days. However, the figure indicates a decline of 45.4% from the year-ago quarter’s reported figure.
The consensus estimate for revenues of $1.53 billion indicates a 22.2% decline from the prior-year quarter’s reported number.
Key Factors & Estimates for Q4
The performance of asset managers in the fourth quarter is expected to have been affected by transitory challenges in the industry. The decline in global markets, which depressed net flows across the industry in the first nine months of 2022, is expected to have continued in the fourth quarter as well.
Secular trends like market share tilt from active to passive; open-ended mutual funds to exchange traded funds, collective investment trusts, and SMAs; and public markets to private markets are expected to have affected TROW’s quarterly performance.
Amid the challenging operating environment, T. Rowe Price is likely to have continued to record net outflows in the fourth quarter. Per the company’s monthly metrics data, it recorded net outflows of $17.1 billion in the quarter under review.
Despite this, the company’s preliminary AUM of $1.28 trillion as of Dec 31, 2022, increased 3.7% from $1.23 trillion recorded as of Sep 30, 2022.
Although the preliminary AUM balance shows a sequential rise, TROW’s investment management business is likely to have been negatively impacted by market fluctuations and foreign exchange translations. The consensus estimate for investment advisory fees of $1.37 billion indicates a fall of 5.3% from the previous quarter’s reported figure.
Also, the consensus estimate for administrative, distribution and servicing fees of $136 million indicates a fall of 6.2% from the previous quarter’s reported figure.
Coming to expenses, T. Rowe Price is expected to have incurred higher employee compensation expenses due to rising salaries on account of inflation. The company’s initiatives to attract investment advisory clients and additional investments from its existing clients are expected to have led to significant expenditure. Thus, overall expenses are expected to have risen in the quarter under review, impeding bottom-line growth.
Management expects capital expenditure (including internal labor capitalization) of $250 million in 2022. The company estimates 2022 non-GAAP operating expenses (including a full year of OHA's operating expenses) to rise 4-7%.
Earnings Whispers
According to our proven model, the chances of T. Rowe Price beating the Zacks Consensus Estimate for earnings this time are high. This is because the company has the right combination of the two key ingredients — a positive Earnings ESP and a 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: T. Rowe Price has an Earnings ESP of +0.69%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Other Stocks to Consider
A couple of other finance stocks, which you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Ameriprise Financial, Inc. AMP and Ares Management ARES.
The Earnings ESP for Ameriprise Financial is +1.28%. AMP currently carries a Zacks Rank #2 (Buy). The company is slated to report results on Jan 25. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ares Management is scheduled to release quarterly results on Feb 9. ARES currently has a Zacks Rank #3 and an Earnings ESP of +5.66%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report
Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
Ares Management Corporation (ARES) : Free Stock Analysis Report
