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Strong Equity Markets to Aid T. Rowe Price (TROW) Q4 Earnings

T. Rowe Price Group, Inc. TROW is scheduled to report fourth-quarter 2019 results, before the opening bell on Jan 29. The company’s revenues and earnings are projected to reflect year-over-year increases.

In the last reported quarter, T. Rowe Price’s earnings outpaced the Zacks Consensus Estimate, driven by higher AUM and revenues. However, escalating expenses were a negative.

T. Rowe Price recorded positive earnings surprises in three out of the trailing four quarters, the average beat being 3.13%.

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

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 fourth quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $1.93 moved up 3.2%, over the last 30 days. The figure indicates a year-over-year increase of 36.9%.

The Zacks Consensus Estimate for sales of $1.45 billion for the quarter reflects an increase of 11.2% from the year-ago quarter’s reported figure.

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

The company has the right 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 +1.47%.

Zacks Rank: T. Rowe Price currently carries a Zacks Rank of 2, which increases the predictive power of ESP.

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 fourth quarter.

Furthermore, the performance of equity markets was impressive in the quarter, with the S&P 500 Index rallying 9.07% 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 $1.18 billion, up around 4.4% sequentially, while net cash inflows are projected at $2 billion, down 20% 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.

Rising Expenses: The company did not point out anything related to its cost-control initiatives during the December-end period. It incurs significant expenditures to attract new investment advisory clients and additional investments from existing clients. T. Rowe Price expects a 4-5% expense rise for 2019. Notably, the company anticipates capital expenditures to be approximately $200 million, including two-third for technology development. Therefore, the to-be-reported quarter’s results might reflect the impact of such anticipations as well.

Other Stocks that Warrant a Look

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

Invesco Ltd. IVZ is slated to release results on Jan 29. The company has an Earnings ESP of +1.39% and carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cullen/Frost Bankers, Inc. CFR is slated to release results on Jan 30. The company has an Earnings ESP of +0.18% and carries a Zacks Rank of 3.

Legg Mason, Inc. LM has an Earnings ESP of +1.59% and at present, holds a Zacks Rank of 2. It is slated to report quarterly figures on Jan 29.

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