T. Rowe Price (TROW) Displays Revenue Rise: Time to Hold?
On Aug 21, 2017, we issued an updated research report on T. Rowe Price Group, Inc. TROW. The company’s shares have gained 9.5% so far this year, underperforming the 16.5% growth of the industry it belongs to. This dismal performance stemmed from escalating expenses and near-term concerns related to investment advisory fees (comprising 88% of total revenue) as changes in the assets under management (AUM) due to market fluctuations and foreign exchange translations could hurt this revenue source of the company.
Here are a few concerns forcing the stock to underperform the broader industry so far:
Firstly, growing operating expenses remain a major concern for T. Rowe Price. The company incurs significant expenditures to attract new investment advisory clients and additional investments from the existing ones. Notably, due to several planned strategic initiatives, T. Rowe Price projects operating expenses to rise 10% for 2017 (excluding the charge tied with Dell appraisal rights matter) and 7% for 2018.
Secondly, in order to maintain a positive yield for fund investors, the company continues to waive fees in its money market mutual funds and trusts, which is likely to continue in 2017 at a very minimal level.
Finally, over the last seven days, the Zacks Consensus Estimate for the stock remained stable at $5.77 for the current year.
However, revenue growth, debt-free position with substantial liquidity and strong capital deployment activities are key strengths of T. Rowe Price. Investment in international growth funds is also likely to diversify the company portfolio, increasing both revenues and the investment management margin.
In addition, the company remains focused on fortifying business via several initiatives namely, launching investment strategies and vehicles, enhancing client engagement capabilities in each distribution channel, strengthening distribution channels in the U.S., EMEA and Asia Pacific, improving technology platform and deriving long-term cost efficiencies.
Currently, T. Rowe Price carries a Zacks Rank #3 (Hold).
Stocks to Consider
LPL Financial Holdings Inc. LPLA has been witnessing upward estimate revisions for the last 60 days. Over the past year, the company’s share price has been up more than 59%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Raymond James Financial, Inc. RJF has been witnessing upward estimate revisions for the last 60 days. Further, the stock has surged nearly 38% over a year. It currently carries a Zacks Rank #2.
E*TRADE Financial Corporation ETFC has been recording upward estimate revisions over the last 60 days. In addition, the company’s shares have surged nearly 58% in a year’s time. It currently holds a Zacks Rank #2.
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