Price's profit grows by 4% Firm's chairman calls results 'respectable,' given market's swings

Investing

October 21, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Associates Inc.'s net income rose 4 percent in the third quarter, but assets that it manages fell in recent months because of volatile markets here and overseas.

The Baltimore-based mutual fund company made $43 million in the quarter that ended Sept. 30, or 33 cents per diluted share, compared with $41.3 million, or 32 cents per diluted share, for the same period a year earlier.

Revenue rose 9 percent in the third quarter to $218.6 million, up from $199.8 million for the same period a year earlier.

The results, however, fell shy of the record $44.9 million Price made in the second quarter of 1998 on revenue of $222 million.

George A. Roche, chairman and president of the country's eighth-largest mutual fund company, said the performance was "respectable" given the volatility in the stock market. He said that future quarterly results could suffer if the financial markets do not rebound.

"Our results reflect the volatility in the financial markets that followed a sharp correction this quarter in stock prices from the highs reached earlier this year," he said.

Roche said that he expects the U.S. and European economies to continue to grow this year, but at a slower rate than prior quarters.

"In this environment, we believe investors should be patient and moderate their expectations for future equity returns," he said.

Price's earnings were a penny shy of Wall Street expectations, according to eight analysts surveyed by Zacks Investment Research. Shares of Price closed at $34.3125, down 62.5 cents.

John A. Hall, an equity analyst at BT Alex. Brown Inc. in Baltimore, said Price's earnings were in line with its estimates and blamed slower growth on the stock market's volatility.

"The earnings in the last quarter are a function of market swings, something that is not in the company's control," Hall said.

For the first nine months of the year, Price's net income jumped 24.5 percent to a record $129.1, or 99 cents per share, compared with net income of $103.7 million, or 81 cents per share, in the first nine months of 1997.

Revenue was up nearly 19 percent to $651 million in the quarter, compared with $548 million for the same period a year earlier.

But while total assets under management rose to $129.5 billion in the third quarter, up from $124.7 billion a year earlier, they fell from $141.9 billion June 30, because of tougher stock market conditions. In August, a "moderate" amount of money flowed out of Price funds, the company said.

Despite the stock market's volatility, $400 million flowed into Price's mutual funds in the third quarter, the company said.

"The basics of the business are in place," Hall said. "As long as people are looking to invest, T. Rowe is going to be a successful firm."

Price relies heavily on promoting its mutual funds through advertisements, and Roche said the company plans to increase advertising in the fourth quarter.

The company spent $50.8 million in advertising and promotion in the first nine months of the year, up 13.9 percent from the corresponding period a year earlier.

Pub Date: 10/21/98

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