Price profit jumps 29.2%

Third quarter comes in well above analysts' estimates

41 cents a share

Record revenue flows forth from stock market boom

Money management

April 21, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Associates Inc.'s net income leaped 29.2 percent in the third quarter, and revenue hit a record $245.8 million, propelled by the robust stock market and a surge in revenue from investment advisory fees.

The country's 10th-largest mutual fund company made $53 million in the first quarter, which ended March 31, compared with $41 million reported for the corresponding period of 1998. Diluted earnings per share increased 28 percent to 41 cents a share in the quarter, compared with 32 cents in the corresponding period a year earlier.

"Our results reflect the continuation of a generally favorable financial market environment and further growth in the assets we manage," said George A. Roche, chairman and president of the Baltimore-based mutual fund company.

Price's earnings far exceeded the estimates of seven Wall Street analysts, who predicted that the company would report 35 cents per diluted share for the quarter, according to Zacks Investment Research.

"I can't say I'm disappointed, they beat the number," said John A. Hall, an analyst at Prudential Securities.

Price, which has come under pressure from competitors such as Vanguard Group in Valley Forge, Pa., and Denver-based Janus, said total assets that it manages increased to $149.2 billion at quarter's end, compared with $147.8 billion at the same point in 1998.

Net cash inflows to the funds were $250 million in the quarter, including $400 million into domestic stock funds, and $350 million into fixed income funds. The money coming into these funds was partly offset by $500 million in money flowing out of international stock funds, the company said.

Hall said a number of mutual fund companies have experienced lighter flows of money into their funds than in previous years.

"What you are increasingly seeing is retail investors are throwing their investment dollars at performance, so the hottest funds attract the most money," he said.

While cash inflows were light, Price generated $191 million in the quarter from investment advisory fees on mutual funds and other investment portfolios, up 17 percent from $164 million in the 1998 period. Operating expenses rose nearly 12 percent to $150.6 million, largely because of higher compensation costs and spending on facilities and equipment. Hall said he expects Price to do well in the second quarter because more stocks are rising than just the large, blue-chip companies that have enamored investors. A broader rally should help Price because the company offers mutual funds that invest in a wide variety of stocks.

"We have seen a broadening in the market in terms of stocks that are performing and we have also seen the emergence in the small-cap market," Hall said. "Those would all speak for strong prospects for T. Rowe Price."

Pub Date: 4/21/99

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