Riding High

Funds: T. Rowe Price is poised to announce a huge jump in earnings.

April 09, 2004|By Paul Adams | Paul Adams,SUN STAFF

T. Rowe Price Group Inc. expects to report an 80 percent jump in first-quarter earnings per share and is well positioned to weather market jitters stemming from the fighting in Iraq and the threat of global terrorism, Chairman and President George A. Roche said yesterday.

Roche told stockholders at the company's annual meeting in downtown Baltimore that revenue for the quarter increased about 40 percent.

The firm's estimates mean Price should post earnings per share of about 56 cents and revenue of roughly $307 million in its first-quarter earnings report April 27. That compares with per-share earnings of 31 cents on revenue of $219 million recorded in last year's slack first quarter.

Analysts polled by Thomson First Call on average expected earnings of 57 cents per share. T. Rowe Price shares closed down $1.05 per share to $53.52 in trading yesterday.

"Part of the reason the first quarter is looking so strong is because first quarter last year was relatively weak," Roche said in an interview after yesterday's meeting.

A surging market in the second half of last year lifted the firm's earnings by 48 percent over the previous year and sent assets under management to a record $190 billion as of Dec. 31. Cash flowing into T. Rowe Price funds continues to be strong, Roche said.

Equity markets continued to rise in the beginning of the most recent quarter, but a correction last month socked most mutual funds, leading to quarterly returns that fell far short of the run-up experienced in the previous six months. The March 11 terrorist bombing in Madrid and continued violence in Iraq have added to uncertainty that threatens to derail a global economic recovery.

"It dominates the news," Roche said. "It creates tremendous uncertainty and anxiety. It will contribute to market volatility, no question."

But in remarks to stockholders, Roche said the firm, which has paid off all of its long-term debts, should do well in the current environment. He noted the improving labor market and low inflation coupled with continued gains in worker productivity. If current trends continue, he said, inflation could become a concern, leading to higher interest rates late this year or early next year.

"Unless there is a large external shock caused by international developments, monetary movement or other factors, we believe the outlook for the financial markets and for our company is very good," Roche said.

Roche briefly addressed the scandals that have rocked the mutual fund industry since September, when a probe of the industry revealed widespread instances of market timing and late trading among some fund groups. Roche said that T. Rowe Price condemns such trading abuses and has not entered into any agreements that authorize market timing by any of its customers.

Shareholders yesterday approved a reduction in the size of Price's board of directors from 15 members to 11. The reduction was designed to increase the proportion of independent directors, who represent six of the 11. New Nasdaq listing standards require firms to have a majority of independent directors. Dwight S. Taylor, president of commercial real estate developer Corporate Development Services, was elected to join the board as an independent director.

The vote on directors was briefly delayed when representatives of graduate student employees from the University of Pennsylvania used the meeting to confront T. Rowe Price Vice Chairman James S. Riepe about a union matter. The group accuses Riepe, who is chairman of the university's board of trustees, of blocking a year-long effort to unionize the student employees.

Graduate students held a union election last year, but the ballots were never counted because the university is appealing the matter to the National Labor Relations Board. One of the students, Lauren Nauta, said the group came to Baltimore because Riepe has refused to meet with them on the matter. Riepe left yesterday's meeting without speaking to the group.

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