T. Rowe Price Earnings Fall Short of Analyst Expectations

European debt crisis and concerns over slowing growth blamed

T. Rowe Price Group Inc. (TROW) reported net revenues of $577.4 million and net income of $158.5 million, or $0.59 per share, for the second quarter ended June 30. The results are an increase of 55% from the $.38 per share at the same time last year, when net revenues were $442.2 million and net income was $100 million, the company said in a Friday, July 23, news release.

Despite the increase, earnings fell short of analyst expectations. Analysts surveyed by Bloomberg expected earnings of $0.61 cents per share.

According to the company, assets under management were $391.1 billion, including $233.5 billion in the T. Rowe Price mutual funds distributed in the United States and $157.6 billion in other managed investment portfolios. Market depreciation, net of income, of $33 billion more than offset the $5.1 billion in net inflows during the second quarter of 2010, as assets under management decreased $27.9 billion from $419 billion at the end of the first quarter.

"Our second quarter financial results were achieved during a difficult period in which the European sovereign debt crisis sparked a sharp correction in global equity markets and volatility returned to levels not seen in more than a year," said James A.C. Kennedy, the company's chief executive officer and president, in a prepared statement. "In spite of this very challenging environment, we remain encouraged by the confidence clients continue to place in us, as evidenced by continued investor interest and demand across our diversified investment strategies."

Total investment advisory revenues were $492 million in the second quarter, an increase of 37%, or $131.7 million, from the comparable 2009 quarter. Relative to the 2009 quarter, investment advisory revenues earned from the T. Rowe Price mutual funds distributed in the U.S. increased 38%, or $94 million, to $342.8 million.

Average mutual fund assets under management in the second quarter of 2010 were $247.4 billion, an increase of 38% from the average for the comparable 2009 quarter. Mutual fund assets at June 30 were $233.5 billion, a decrease of 6%, or $16 billion, from the end of March 2010, and $13.9 billion lower than the second quarter 2010 average.

The company said target-date retirement investment portfolios continue to be a good source of assets under management. During the second quarter, net inflows of $1.6 billion originated in these portfolios. Assets in the target-date retirement portfolios were $45.9 billion on June 30, accounting for nearly 12% of the firm's assets under management and 19% of its mutual fund assets.

Research Senior Web Editor Janet Levaux and Advisor Media Group Associate Editor Joyce Hanson contributed to this report.

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