Price, Under Armour earnings jump

Mutual fund firm's shares lifted by 24% rise in profit

April 27, 2006|By PAUL ADAMS | PAUL ADAMS,SUN REPORTER

T. Rowe Price Group Inc. reported yesterday record revenue and a 24 percent increase in first-quarter profit as the market gained momentum and investors poured more money into the Baltimore investment firm's mutual funds.

The company's shares reached an all-time high on the news yesterday.

Price had net income of $116.7 million, or 84 cents per diluted share, in the quarter that ended March 31, compared with $94 million, or 69 cents per share, in the year-earlier period. Revenue climbed 20 percent to $429.3 million from $357 million in the year-ago quarter.

Investors placed an additional $9.6 billion into Price mutual funds during the quarter and market gains added $13.8 billion, pushing assets under management to a record $292.9 billion. That's up almost 25 percent from March 31, 2005.

"What's most encouraging is the customer inflows, because markets come and go," said Matt Snowling, an analyst with Friedman Billings Ramsey Group Inc. in Arlington, Va., who doesn't own Price shares.

The company's shares touched an all-time high of $87.23 per share in trading yesterday before closing at $86.01, up $2.49, or 3 percent. The company's shares have gained 19 percent so far this year. Earnings beat the average estimate of analysts polled by Thomson Financial by 3 cents per share.

The company ended the quarter debt-free and with $1 billion in cash and liquid assets, leaving it well-positioned to fund acquisitions. "They're basically building up a war chest, and that puts them in position to be patient and pick off some of these assets as they come up for sale," said Snowling, who has a "buy" rating on the stock.

George A. Roche, Price's chairman and president, said the firm will pursue small acquisitions, particularly of fixed-income assets. Prime candidates are assets managed by banks, insurance companies and brokers that entered the money management business as an add-on.

"In order to be successful in this business in the long run, you have to be able to run the money, and they've found it's more difficult to run the money than they imagined," Roche said. "Therefore, many of them want to exit the business."

Roche said rising interest rates could pose a mix of problems for the market in coming quarters, and rising oil prices and concerns about geopolitical instability continue to worry investors. Higher energy costs will be a drag on consumer spending, but Roche said corporate profitability remains strong, and businesses will step up spending on equipment and technology.

"The company's strong financial position really puts it where it should be in good shape to ride through any period of difficulty if, unfortunately, we have one," he said.

The company saw a 22 percent year-over-year increase in revenue from investment advisory fees to $353.9 million. Investors added $2.5 billion to the company's U.S. stock funds, $1.9 billion in international funds and $1.1 billion to bond and money market funds.

Expenses jumped 20 percent to $251 million, mostly as a result of increased compensation costs and a 5 percent increase in staff size.

paul.adams@baltsun.com

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