T. Rowe Price results surprise Wall Street in win for disliked investment manager

Shares of T. Rowe Price Group (TROW) climbed after it reported results for the second quarter that topped Wall Street expectations. The beat was a much needed win for a company with a large number of sell recommendation and almost no buy ratings.

T. Rowe Price reported earnings per share for the second quarter of $2.02, topping consensus by $0.29. Revenue was slightly better than consensus at $1.61 billion. It reported quarter end assets under management of $1.40 trillion.

“While equity outflows continued in the second quarter, we saw improved performance in a number of important investment strategies. Stronger equity markets helped lift revenue from first quarter levels, and we identified substantial cost savings that will allow us to meaningfully slow expense growth while continuing to pursue our strategic initiatives,” said Rob Sharps, chief executive officer and president.

Brian Bedell, a research analyst at Deutsche Bank, described results for the quarter as “mixed.”

Bedell explained, “Positively, adjusted operating expenses were 3.6% better than our estimate and Consensus, and total net revenue was 1.2% higher than our forecast and 1.7% above Consensus, driven by higher capital allocation-based income and administrative fees. However, base investment management fees missed our estimate by 1.2% and Consensus by 1% on 4bps of fee pressure and slightly lower average AuM. Net outflows also worsened to $20bn from $16bn in 1Q, and though investment performance is beginning to improve, outflows remain.”

Nine analysts who cover the stock rate it “neutral,” and at least seven view the stock as a “sell” or “underperform.” Only a few analysts think T. Rowe Price’s stock is a “buy.”

T. Rowe Price’s shares climbed by over 8.5% shortly after it published results, but it wasn’t clear if its positive performance in the quarter would be enough for analyst to finally become more bullish.

By Louis Juricic