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T. Rowe Price (TROW) Q4 Earnings Beat Estimates, AUM Dips Y/Y

T. Rowe Price Group, Inc. TROW reported fourth-quarter 2022 adjusted earnings per share of $1.74, which outpaced the Zacks Consensus Estimate of $1.72. The bottom line, however, declined 45.1% year over year.

TROW's net revenues were adversely impacted by the decline in assets under management (AUM) and investment advisory fees. Also, the company recorded a rise in expenses during the quarter. Nonetheless, appreciation in cash and cash equivalent will help the company to continue investing.

Net income attributable to T. Rowe Price was $266 million, down 64.1% from the prior-year quarter.

In 2022, adjusted earnings of $8.02 per share beat the consensus estimate of $7.98 but declined 37.1% year over year. Net income attributable to T. Rowe Price was $1.56 billion, plunging 49.5%.

Revenues Decrease, Expenses Rise

Net revenues in the fourth quarter decreased 22.3% to $1.52 billion from the year-ago quarter. The decline was mainly due to a fall in investment advisory fees. The top line also missed the Zacks Consensus Estimate of $1.53 billion.

In 2022, net revenues were $6.49 billion, down 15.4% year over year. The top line, however, marginally beat the consensus estimate of $6.48 billion.

Investment advisory fees fell 24.4% to $1.37 billion. Administrative, distribution and servicing fees decreased 14.9% to $129.4 million.

Total operating expenses increased 15.6% to $1.27 billion in the reported quarter.

As of Dec 31, 2022, T. Rowe Price employed 7,868 associates, up 4.5% from the end of 2021.

AUM Dips, Liquidity Position Strong

As of Dec 31, 2022, total AUM declined 24.5% year over year to $1.27 trillion. In the December-end quarter, net market depreciation and net distributions not reinvested of $61.8 billion, and net cash outflow of $17.1 billion reduced TROW’s AUM.

T. Rowe Price had substantial liquidity, including cash and cash equivalent of $1.76 billion as of Dec 31, 2022, up from $1.52 billion as of Dec 31, 2021. This will enable TROW to keep investing.

Share Repurchase Update

In the reported quarter, T. Rowe Price repurchased 1 million shares of its common stock for $111.3 million.

Our View

A challenging operating backdrop and geopolitical concerns have affected TROW’s AUM in recent months. Going forward, the increased dependence on investment advisory fees is concerning, as market fluctuations and a sudden slowdown in overall business activities could hurt this revenue source. However, a diversified business model, focus on enhancing investment capabilities, broadening distribution reach and improving client partnerships will aid long-term growth.

T. Rowe Price Group, Inc. Price, Consensus and EPS Surprise

T. Rowe Price Group, Inc. Price, Consensus and EPS Surprise
T. Rowe Price Group, Inc. Price, Consensus and EPS Surprise

T. Rowe Price Group, Inc. price-consensus-eps-surprise-chart | T. Rowe Price Group, Inc. Quote

Currently, T. Rowe Price carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Asset Managers

BlackRock, Inc.’s BLK fourth-quarter 2022 adjusted earnings of $8.93 per share surpassed the Zacks Consensus Estimate of $7.99. The figure reflects a decrease of 16.4% from the year-ago quarter.

The quarterly results benefited from a decline in expenses. However, lower revenues and AUM balance were the major headwinds for BLK.

Invesco’s IVZ fourth-quarter 2022 adjusted earnings of 39 cents per share surpassed the Zacks Consensus Estimate of 36 cents. The bottom line, however, plunged 54.7% from the prior-year quarter. Our estimate for earnings was 33 cents.

Results benefited from a decline in operating expenses. On the other hand, lower AUM balance and long-term outflows hurt IVZ’s revenues.

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