Fund manager T. Rowe Price Group, Inc. (TROW), Thursday reported a six-fold surge in profit for the fourth quarter, helped by strong quarterly revenues, as well as the absence of non-cash charges recorded in the prior year quarter. Earnings for the quarter came in ahead of Street expectations, however, revenues fell short.
Net income of T. Rowe jumped to $152.5 million or $0.57 per share from $24.3 million or $0.09 per share in the same quarter a year ago.
On average, 17 analysts polled by Thomson Reuters expected earnings of $0.55 per share for the quarter. Analysts' estimate typically excludes one-time items.
Results for the year ago quarter of 2008 included non-cash charges of $88 million for the other than temporary impairment of certain of the firm's investments in sponsored mutual funds. The non-operating charge, after related tax benefits, reduced by $0.22 per share, including which earnings would have been $0.31 per share in the fourth quarter of 2008.
T. Rowe's net revenues surged to $542.6 million from $415.9 million in the year earlier quarter but below Street estimates of $546.57 million for the quarter.
Investment advisory fees increased 40% to $461.7 million from $329.9 million, while administrative fees decreased to $80.1 million from $85.5 million in the year-earlier quarter.
Sequentially, in the third quarter, T. Rowe reported a lower profit, hurt by declines in investment advisory and administrative fees. Net income for the quarter was $132.4 million or $0.50 per share and net revenues were $498.1 million.
After grinding through a period of tough market environment since the Great Depression, fund managers including the likes of T. Rowe has started finding some relief, as the investors have started reinvesting in good faith of recovery.
James Kennedy, chief executive officer and president said, "While our net revenues, net income, and earnings per share have rebounded, they remain lower than their 2008 levels and well below their highs in 2007. Our level of assets under management has recovered strongly and ended 2009 approaching the year-end 2007 peak of $400 billion; however, our average assets under management from which we derive our investment advisory revenues was well below the average assets under management in each of the prior two years. As such, we have remained very attentive to expense control, including earlier in 2009 when we made the difficult decision to implement a workforce reduction."
One of the biggest fund managers in the industry, BlackRock, Inc. (BLK), reported a jump in fourth quarter profit to $256 million or $1.62 per share from $52 million or $0.39 per share in the prior year. Total revenue of BlackRock was up at $1.544 billion.
Investment managers Franklin Resources, Inc. (BEN), reported a first quarter profit that nearly tripled to $355.6 million or $1.54 per share, helped by quarterly revenues that increased 42% to $1.38 billion on a 34% increase in investment management income and a 60% jump in underwriting and distribution revenue.
For the quarter under review, investment advisory revenues earned from the T. Rowe Price mutual funds distributed in the United States increased 39% to more than $318.4 million, and average mutual fund assets under management increased 37% to $225.2 billion. Mutual fund assets at December 31, 2009 increased 6.5% or $14.3 billion from the end of September 2009.
Net inflows to the mutual funds were $4.0 billion, including $3.8 billion to bond funds and $0.8 billion to stock funds, net of $0.6 billion transferred to other managed investment portfolios.
Net cash inflows in the fourth quarter 2009 totaled $7.3 billion, while higher market valuations and income added $17.8 billion to assets under management.
Investment advisory revenues earned on the other investment portfolios that the firm manages increased $42 million to more than $143 million. Average assets in these portfolios were $151.9 billion, up $38.5 billion or 34.0%, from the 2008 quarter.
Assets under management increased from $366.2 billion at September 30, 2009, to $391.3 billion at December 31, 2009, including $232.7 billion in the T. Rowe Price mutual funds distributed in the United States and $158.6 billion in other managed investment portfolios.
Operating expenses were $312.8 million in the quarter, up $18 million from $294.9 million recorded in the year-earlier quarter. Advertising and promotion expenditures were down 22.5%, or $6.9 million.
Net operating income increased to $229.8 million from $121.0 million in the year-earlier quarter. Non-operating investment income was $10.2 million compared to investment loss of $80.1 million in the prior-year quarter.
Based on current strategic projects and plans, the company is considering a 2010 capital expenditure plan of about $150 million for property and equipment additions,expected to be funded from cash balances.
For full-year 2009, net income was $433.6 million or $1.65 per share, down from $490.8 million or $1.81 per share a year ago. Net revenues dropped to $1.87 billion from $2.12 billion in the prior year. Street expected earnings of $1.63 per share, on revenues of $1.87 billion for the year.
On December 18, 2009, brokerage Stifel Nicolaus upgraded T.Rowe shares to 'Buy' from 'Hold,' with a mean target of $57.79.
TROW is currently trading at $49.27, down $3.48 or 6.61%, on a volume of 1.92 million shares. In the last 52-week period, the stock traded in a range of $20.09 to $55.48, with a three-month average volume of 1.94 million shares.
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