Leave it to T. Rowe Price (Nasdaq: TROW) to bail out the mutual fund industry this morning. During a week that saw fund-pitching players like Franklin Resources (NYSE: BEN), AllianceBernstein (NYSE: AB), and Janus Capital (NYSE: JNS) post sharp drops in profitability, bellwether T. Rowe Price came back with relatively healthy results.
The key word there is "relative," since T. Rowe Price didn't grow during the period. Net income fell by 13%, to the per-share equivalent of $0.56. Revenue slid 3% to $554.8 million. However, the results met Wall Street's bottom-line expectations and actually clocked in ahead of what analysts were braced for on top. In this dicey environment, that's good enough for a bunt single.
Between T. Rowe Price's report and last night's encouraging news from Federated Investors (NYSE: FII) -- where earnings fell by a mere 3% during the quarter -- it's comforting to know that mutual fund investors are sticking to their guns, and their funds.
That's no easy feat. T. Rowe Price is managing $345 billion in assets, significantly less than the $400 billion it watched over at the start of the year. The market has taken a deeper dive than that, of course, which is a testament to two things working in T. Rowe Price's favor:
- Cash inflows have slowed, but remain positive, meaning that fund investors are putting in more money than they have been redeeming.
- T. Rowe Price's funds are, on average, smoking the competition. More than half of the company's funds have enviable four- and five-star ratings from fund researcher Morningstar (Nasdaq: MORN), compared to about a third of the overall industry's funds. A whopping seven T. Rowe Price funds have made the cut as Champion Funds recommendations.
Naturally, investors will be tested if the market weakness continues. If their mutual-fund statements seem grim after the third quarter, they may get outright panicky if things don't improve before the year-end statements go out.
T. Rowe Price is built to last, though. With a debt-free balance sheet and $1.5 billion in cash and investments, it will outlast weaker players, and possibly snack on one or two. It's already starting taking a few bites of its own stock, having repurchased nearly 4% of its outstanding shares over the past year.
Keep floating, T. Rowe, no matter how hard the market is rocking.
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