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Will Inflows Support T. Rowe Price's (TROW) Q1 Earnings?

Zacks Equity Research

T. Rowe Price Group, Inc. TROW is scheduled to report first-quarter 2019 results, before the opening bell on Apr 24, with its revenues and earnings projected to decline year over year.

In the last reported quarter, T. Rowe Price lagged the Zacks Consensus Estimate, underlining higher expenses and lower AUM. However, top-line strength was a positive factor.

T. Rowe Price recorded positive earnings surprise in one out of the trailing four quarters, delivering average beat of 0.08%.
 

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

T. Rowe Price Group, Inc. Price and EPS Surprise | T. Rowe Price Group, Inc. Quote

Further, activities of the company in the first quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $1.61 remained unchanged over the last seven days. The figure indicates year-over-year decline of 9%.

The Zacks Consensus Estimate for sales of $1.3 billion for the quarter also reflects a fall of 3.4% from the year-ago quarter’s reported figure.

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

The company has 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 +2.19%. This is a very significant and leading indicator of a likely positive earnings surprise for the company.

Zacks Rank: The combination of T. Rowe Price’s Zacks Rank #2 and a positive ESP makes us confident of an earnings beat.

Factors to Influence Q1 Results

Overall Inflows Expected: According to the Morningstar data, T. Rowe Price witnessed around $4.4 billion of net inflows on a combined basis, being outflows in U.S. mutual fund products and net inflows excluding transfers to other portfolios in Q1.

Furthermore, the performance of equity markets was favorable in the first quarter, with the S&P 500 index increasing 13.1% sequentially. Therefore, the company’s results will likely reflect a rise in assets under management (AUM) on overall inflows.

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 upbeat 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 to Escalate: The company did not point out anything related to its cost-control initiatives during the Mar-end quarter. 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 current year to be approximately $200 million, including two-third for technology development.

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.

The Earnings ESP for BankUnited, Inc. BKU is +1.89% and the stock currently carries a Zacks Rank of 3. The company is scheduled to release first-quarter results on Apr 24. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SVB Financial Group SIVB has an Earnings ESP of +0.42% and holds a Zacks Rank of 3, at present. It is slated to report results on Apr 25.

Northern Trust Corporation NTRS has an Earnings ESP of +0.57% and carries a Zacks Rank #3, currently. It is set to release Jan-Mar quarter figures on Apr 23.

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