July 30, 2007
T. Rowe Price (Nasdaq: TROW ) once again proved solid strength in its quarterly earnings report.
Assets under management at T. Rowe climbed 8.5% from the prior quarter, to a record $379.8 billion. The firm reported a 19% increase in earnings and a 24% increase in revenue, boosted by a 25% rise in investment advisory fees from a year ago. An additional $22 billion came from net market appreciation and income. Investors forked over $7.9 billion in new cash flows, showing strong demand across product lines. Investment performance also remained strong, with at least 74% of the company's funds surpassing their comparable Lipper averages on a total return basis for the one-, three-, five-, and 10-year periods ended June 30.
The company remains debt-free, with $1.7 billion in cash and investment corporate holdings, after having repurchased nearly 1.6 million shares in the second quarter. Net cash inflows were distributed broadly, including an 18.5% increase in retirement accounts, which usually represent "stickier" assets. Expenses, a source of criticism from the previous quarter, appeared well-managed, as the operating margin widened 231 basis points from a year ago, to 43.3%.
Management noted that strong equity market returns bolstered its performance, a factor influencing the results of other money managers. Rivals Ameriprise (NYSE: AMP ) , Franklin Resources (NYSE: BEN ) , and Janus Capital (NYSE: JNS ) all topped expectations last week. Still, T. Rowe was able to execute particularly impressively. The firm's strong asset growth and global reach, with investors outside the United States now accounting for 8% of assets under management, far outpaced the anemic 2% asset growth rate of Legg Mason (NYSE: LM ) . Given its solid record, T. Rowe exhibits the potential to navigate any future shakiness in the financial markets better than most money managers.
For previous articles, see:
Legg Mason is a Motley Fool Inside Value recommendation. Learn more by taking a free 30-day trial today.
Fool contributor S.J. Caplan does not own shares of the companies mentioned here. The Fool has a disclosure policy.