T. Rowe Price's earnings nearly double in 1st quarter

Assets under management rise to record $201 billion

revenue increases 40%

April 28, 2004|By Paul Adams | Paul Adams,SUN STAFF

T. Rowe Price Group Inc. said yesterday that its first-quarter profit nearly doubled and earnings per share matched a record set during the first quarter of 2000, when stock market valuations peaked before entering a three-year slump.

Mutual fund investors shrugged off concerns about sluggish job growth and fighting in Iraq and poured $6.4 billion into T. Rowe Price funds during the quarter, helping to lift the Baltimore investment firm's net income to $77.3 million, or 58 cents per share. For the corresponding period in 2003, Price reported net income of $39 million and earnings per share of 31 cents.

Appreciation resulting from the rising stock market added another $4.7 billion to the firm's assets under management, bringing the total to a record $201 billion as of March 31. And there's no sign that things are about to slow down, said George A. Roche, the company's chairman and president.

"It's a combination of a strong market - or at least a stable to rising market - and strong cash flows," he said.

First-quarter revenue climbed to $306 million, up 40 percent from $219 million reported in the first quarter last year. The increase in assets under management helped drive revenue by bringing in more management fees.

Shares of T. Rowe Price climbed $2.54, or 5 percent, to $52.79 in trading yesterday.

"They continue to spend strongly on marketing and their margins are increasing," said Ken Worthington, an analyst with CIBC World Markets in New York. "This is just a high-quality franchise and I think these earnings reflect that."

Price said it expects to increase its advertising budget 20 percent to 25 percent for the full year, including a $4 million increase in the second quarter.

Theodore L. Parrish, who co-manages the Henssler Equity Fund and owns about 65,000 shares of T. Rowe Price, said the firm has benefited from its clean image in the wake of the mutual fund scandals that emerged in the fall.

"The only risk is a pullback in the market because the company does have more equity exposure than some mutual fund shops," he said.

Roche and other T. Rowe Price officials have forecast a gradual increase in equity valuations, provided there are no shocks to the economy, such as a terrorist attack or a major setback in the war in Iraq. Employment reports also will weigh heavily on the market's recovery.

"It's very important to make progress on the jobs front if we want to continue to have the economy do well," Roche said.

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