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T. Rowe Price (TROW) Q3 Earnings Beat on Higher Revenues

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T. Rowe Price TROW reported third-quarter 2021 adjusted earnings per share of $3.27, which outpaced the Zacks Consensus Estimate of $3.31. The reported figure also climbed 28.2% year over year.

Results were driven by higher revenues, backed by an increase in investment advisory fees. Also, assets under management (AUM) improved. However, escalating expenses were an undermining factor.

Including certain non-recurring items, net income came in at $777.2 million or $3.31 per share compared with the $643.2 million or $2.73 recorded in the prior-year quarter.

Revenues Improve, Expenses Up

Net revenues in the third quarter increased 22% to $1.95 billion from the year-ago quarter’s figure. This upswing primarily resulted from higher investment advisory, and administrative, distribution and servicing fees. The reported figure also surpassed the Zacks Consensus Estimate of $1.97 billion.

Investment advisory fees climbed 23.4% year over year to $1.81 billion. Additionally, administrative, distribution and servicing fees jumped 11.2% to $140.7 million.

Investment advisory revenues earned from T. Rowe Price mutual funds distributed in the United States were up 19.8% year over year to $1.1 billion. Investment advisory revenues earned from other investment portfolios managed by the company increased 29.8% from the prior-year quarter to 687.9 million.

Total adjusted operating expenses flared up 15.3% year over year to $957.2 million in the reported quarter. Including certain one-time items, expenses came in at $957.9 million, up 10.5%. Rise in compensation costs as well as distribution and servicing costs induced this increase.

Moreover, as FIS began providing technology development and core operations on Aug 1, 2021, the T. Rowe Price incurred higher recordkeeping costs, which were partially offset by lower compensation expense related to nearly 800 associates who transitioned to FIS as well as low transition costs of the partnership. All these expenses were partially offset by lower compensation costs related to supplemental savings plan.

As of Sep 30, 2021, T. Rowe Price employed 7,124 associates, down 6.7% from the prior-year level.

Assets Grow, Liquidity Position Strong

As of Sep 30, 2021, total AUM rose 23% year over year to $1.61 trillion. During the September quarter, net market depreciation and losses were $4.2 billion while net cash outflow was $6.4 billion after client transfers.

T. Rowe Price remained debt free with substantial liquidity including cash and cash investments of $3.42 billion as of Sep 30, 2021. This will enable the company to keep investing.

Capital-Deployment Activity

During the reported quarter, T. Rowe Price repurchased 1 million shares of its common stock for $217.7 million at an average price of $182.27.

Our Viewpoint

T. Rowe Price put up an impressive show during the September quarter on stellar revenues. The company has the potential to benefit from growth in domestic and global AUM. Though higher operating expenses unfavorably impacted T. Rowe Price and the pandemic-induced economic uncertainty is a major concern, the bank’s debt-free position and higher return on earnings as a whole, make us confident of its robust fundamentals.

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

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

T. Rowe Price Group, Inc. price-consensus-eps-surprise-chart | T. Rowe Price Group, Inc. Quote

Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Asset Managers

BlackRock, Inc.’s BLK third-quarter 2021 adjusted earnings of $10.95 per share outpaced the Zacks Consensus Estimate of $9.63. The figure reflects a rise of 18.8% from the year-ago quarter’s number.

Blackstone’s BX third-quarter 2021 distributable earnings of $1.28 per share comfortably surpassed the Zacks Consensus Estimate of 93 cents. The figure reflects a significant rise from 63 cents recorded in the prior-year quarter.

SEI Investments Co.’s SEIC third-quarter 2021 earnings of 97 cents per share were in line with the Zacks Consensus Estimate. The bottom line reflected 29% growth from the prior-year quarter’s level.


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