Investment manager T. Rowe Price Group Inc. (TROW) Friday reported a lower third-quarter profit, hurt by declines in investment advisory and administrative fees. The Baltimore, Maryland-based company also stated that it is optimistic that the market downturn is behind it and the long-term outlook remains strong.
Third-quarter net income available to common stockholders was $132.4 million or $0.50 per share, compared with net income of $152.4 million or $0.56 per share in the same quarter last year.
On average, 18 analysts polled by Thomson Reuters expected the company to earn $0.46 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenues for the quarter were $498.1 million, down from $554.8 million in the comparable quarter last year. Analysts were looking for revenue of $495.51 million for the quarter.
"Our third quarter results were achieved during a period of very strong market performance that extended the impressive rally that started in early March. While we are pleased that the market reversal and the strong absolute and relative performance of our investment strategies have given a significant boost to the value of our clients' portfolios, we nevertheless remain mindful that most equity investors have yet to recover all of their losses," said James Kennedy, chief executive officer and president of the company.
For the second quarter, the company's net income was $100 million or $0.38 per share on net revenues of $442.2 million.
During the third quarter, the company's investment advisory revenues decreased 10.4% to $417.3 million from the comparable quarter last year. Investment advisory revenues earned from the T. Rowe Price mutual funds distributed in the United States were down 11.5% to $289.4 million. Investment advisory revenues earned on the other investment portfolios that the firm manages were $127.9 million, a decline of 7.9% from the prior year.
Administrative fees declined to $80 million from $88.7 million in the previous year. Investment income of savings bank subsidiary was $1.8 million, up from $1.5 million in the same period of fiscal 2008.
Assets under management increased from $315.6 billion at June 30, to $366.2 billion at September 30, including $218.4 billion in the T. Rowe Price mutual funds distributed in the United States and $147.8 billion in other managed investment portfolios. Net cash inflows in the third quarter 2009 totaled $7.4 billion. Higher market valuations and income added $43.2 billion to assets under management in the 2009 quarter, the company said.
Average mutual fund assets under management were $204.3 billion, a decrease of 9.7% from the average for the previous year. Mutual fund assets at September 30, 2009 were $218.4 billion, up 15.6% from the end of June 2009.
For the nine-month period, the company earned $465.5 million or $1.71 per share, compared with $280.1 million or $1.07 per share last year. Net revenues rose to $1.70 billion from $1.32 billion in the same period of fiscal 2008.
T. Rowe said that the actions taken by governments and central banks around the world have succeeded in pulling markets back onto more stable ground. The strength of the global market rebound still leaves the company cautious as headwinds persist and equity valuations may have gotten ahead of the recovery. However, the company is generally optimistic that the worst of the global economic and market downturn is behind, T. Rowe noted.
"As global economies continue on the road to recovery, the long-term outlook for T. Rowe Price remains strong," James Kennedy added.
Based on current strategic projects and plans, the company's property and equipment additions for all of 2009 are estimated to be about $168 million, including $103 million already expended this year from its available liquid resources.
TROW is trading at $52.45, up $3.34, on a volume of 376,118 shares.
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