Profit, revenue soar for Price Firm has strong 3rd quarter

stock rises

Investing

October 21, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Associates Inc.'s revenue rose 33 percent and net income jumped 59 percent in the third quarter to record levels as money continued to pour into its mutual funds, the company said yesterday.

Price posted $199.8 million in revenue in the third quarter, which ended Sept. 30, up from $150.2 million for the same time a year earlier.

Net income shot up to $41.3 million in the quarter, compared with $25.9 million the same time in 1996. Earnings per share rose 52 percent to 64 cents, compared with 42 cents.

"They are doing phenomenally well," said Bruce R. Brewington, an analyst with San Francisco-based Putnam Lovell & Thornton. "I would expect to see earnings gains continue."

Brewington said Price beat his earnings estimate of 57 cents a share in the quarter. He expects the Baltimore-based mutual fund company to report earnings per share of $2.22 for the year, and $2.75 for 1998.

Over the next 12 months, Brewington sees Price's stock rising to $75 a share.

It closed yesterday at $67 a share, up 62.5 cents.

Price's robust quarter follows a similarly strong one for Legg Mason Inc., which last week reported record revenue of $212.9 million and net income of $18.8 million, for its fiscal second quarter, which ended Sept. 30.

"Despite the temporary setback in the U.S. financial markets during August, returns thus far in 1997 remain strong, surpassing our expectations," said George A. Roche, chairman and president of Price. "Barring some unforeseen event, we expect 1997 will be a record year for the company."

Price's revenue jumped nearly 30 percent to $547.8 million in the first nine months of the year, compared with $426.3 million for the same period a year earlier. Net income was up 46.5 percent to $103.7 million, or $1.63 per share, compared with $70.8 million, or $1.15 per share.

A combination of money flowing into Price's mutual funds and appreciation of the holdings it manages drove assets under management to $124.7 billion, up $25.3 billion over the past nine months.

Assets managed in Price's mutual funds hit a high of $81.7 billion, an increase of $17.3 billion over the past nine months. Net cash inflows to its mutual fund, which is the amount of money investors have put into the fund minus withdrawals, increased $7.7 billion in the first nine months of the year.

International assets managed by Rowe Price-Fleming International, a subsidiary company 50 percent owned by Price, ended the quarter with $33 billion in assets, up 22 percent from a year earlier.

Price's operating expenses rose 24.4 percent to $125.2 million, driven largely by compensation, which was up 28 percent. The company, which employs about 2,900 people, continues to expand its staff primarily by hiring specialists in computer programming, software and systems analysis.

Pub Date: 10/21/97

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