T. Rowe Price's 2Q profit is up 49% to $80 million

Earnings per share fall short of disputed estimates

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

T. Rowe Price Group Inc. reported yesterday a 49 percent increase in second-quarter earnings as investors shrugged off global uncertainty and poured their savings into the stock market.

The Baltimore mutual fund company said its assets under management stood at a record $206.8 billion as of June 30, 9 percent more than at the end of the second quarter last year.

The increase in assets may be a strong indication that the company had picked up business from investors shifting money from mutual funds firms named in federal and state investigations into trading abuses.

Net income rose to $80.3 million, or 60 cents per share, compared with $53.8 million, or 58 cents per share, in the second quarter last year. The average estimate of analysts polled by Thomson Financial was 62 cents per share, but company officials said the average was skewed by one analyst who set a high forecast in February before the market began to sputter.

Net revenue climbed to $309.7 million, an increase of 30 percent over $237 million in the second quarter last year.

"My view is we're going to have a very strong year," said George A. Roche, the company's chairman and president.

But he said results would depend on the direction of the market, which has been down in recent weeks on fears about rising interest rates and the war on terror.

"Corporate earnings are quite good and that's really positive," Roche said. "The companies have repaired their balance sheets and everything, but you have geopolitical uncertainty."

Analysts called it a solid quarter for the company, despite earnings per share that fell short of some Wall Street estimates. Shares of Price rose $1.55, or 3.5 percent, yesterday to close at $46.31.

"We talk about companies not meeting consensus [estimates], but I think in this case the consensus missed T. Rowe," said Ken Worthington, an analyst with CIBC World Markets in New York.

He agreed with the company's assessment that some analysts might have simply neglected to revise their estimates downward as the market began to struggle later in the quarter.

Worthington, who doesn't own Price shares, said the company is poised to outperform many of its peers for the remainder of the year despite a market that is in negative territory.

Analysts said the company's fundamentals are all strong. Investment advisory fees climbed 35 percent, or $65.1 million, in the second quarter compared with the quarter a year ago.

Average mutual fund assets grew to $125 billion, up $30 billion from the average in the second quarter last year. Most assets flowed to U.S. domestic stock funds, particularly the Mid-Cap Value, Equity Income and Growth Stock funds, the company said.

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