T. Rowe Price profit increases 8 percent

`Solid quarter' positions company well for market rebound, analyst says

April 19, 2002|By William Patalon III | William Patalon III,SUN STAFF

T. Rowe Price Group Inc. reported yesterday an 8 percent increase in first-quarter profit - despite a 14 percent decline in revenue - and has itself well-positioned for when the U.S. stock market rebounds, according to a securities analyst who follows the company.

"T. Rowe Price had a pretty solid quarter, despite the ... uncertain market conditions it faced," said Bruce Brewington, a vice president with Putnam Lovell Securities in San Francisco and an expert on the asset-management industry. "The earnings-per-share figure was actually a little better than I expected."

Baltimore-based Price reported net income of $53 million, or 41 cents a share, for the quarter ending March 31. Both numbers represented an 8 percent improvement from the net income of $49 million, or 38 cents a share, recorded during the first quarter of last year.

Even so, the net income figure of 41 cents a share was a penny less than the consensus estimate of 11 analysts surveyed by Zacks Investment Research.

Revenue dropped 14 percent, to $242 million this year from $280 million in the first quarter last year.

Price, a mutual fund and investment advisory company, said the first-quarter results were heavily influenced by a drop in mutual fund assets, which reduces advisory fees. Mutual fund assets averaged $98 billion in the first three months of this year, a decline of 5 percent from the $103 billion average for the period last year, according to the company.

Price's first-quarter results would have been significantly lower were it not for the great job the firm did in managing expenses, Brewington said.

Operating expenses were down $41 million, or 21 percent, to about $157 million in this year's first quarter over last year - chiefly because of a big drop in compensation expenses brought about by job cuts and planned work-force attrition.

While the cost reductions strengthened Price, other factors bode well for the future - especially once the stock market begins a consistent climb.

Total assets under management were $159.8 billion March 31, an increase of $3.5 billion from the $156.3 billion recorded Dec. 31. Central factors in the overall increase were net cash inflows of $1.2 billion into T. Rowe Price mutual funds, and $1.3 billion into the firm's managed-asset portfolios.

"Generally speaking, that may be the single best positive about the quarter," Brewington said.

George A. Roche, Price's chairman and president, said the rest of this year "should be one of improvement."

"Provided there is not a severe external shock to the [financial] system, the financial markets should move modestly higher," Roche said. "This environment, combined with our diversified business base, should also improve the outlook for our company for the rest of 2002."

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