On Sep 17, 2014, we issued an updated research report on T. Rowe Price Group Inc. (TROW). Shares of this investment management company have recorded a one-year return of 10.5%. Further, T. Rowe Price has outpaced the Zacks Consensus Estimate in the last four quarters, with an average beat of 2.48%.
We believe this growth story has been aided by the company’s continued focus on revenue growth among several other positives including a strong capital position, steady capital deployment activities and diverse business model.
Organic growth remains a key strength at T. Rowe Price, as reflected by its revenue growth story. Net revenues increased 16.1% year over year in first-half 2014. We believe the company is well positioned to maintain this trend going forward.
T. Rowe Price is an attractive asset for yield-seeking investors due to its strong capital deployment activity. In Feb 2014, T. Rowe Price’s board of directors approved a 16.0% hike in the company’s quarterly common stock dividend. This marks T. Rowe Price’s 28th consecutive annual dividend increase. Moreover, in first-half 2014, the company paid $231.7 million in regular dividends and repurchased common stock worth $57 million.
Despite strong fundamentals, we believe there are certain issues that may create pressure on the company’s financials in the near term. These include elevated operating expenses and cyclical and secular pressures in the asset management business.
For 2014, the Zacks Consensus Estimate over the past 60 days remained stable at $4.61 per share, while for 2015 it decreased by a penny to $5.10 per share, over the same time frame. Hence, T. Rowe Price carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better ranked investment management companies include AllianceBernstein Holding L.P. (AB) with a Zacks Rank #1 (Strong Buy), while Ameriprise Financial, Inc. (AMP) and SEI Investments Co. (SEIC) carries a Zacks Rank #2 (Buy).
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