On Jul 3, we issued an updated research report on T. Rowe Price Group Inc. TROW. This investment management company has outpaced the Zacks Consensus Estimate in two of the last four quarters, with an average beat of 0.46%.
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 a diverse business model.
Organic growth remains a key strength at T. Rowe Price, as reflected by its revenue growth story. Net revenues grew at a CAGR of 13.9% over the last five years (2010–2014), with the trend continuing in first-quarter 2015 as well. 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 2015, the company hiked its quarterly common stock dividend by 18%, marking T. Rowe Price’s 29th consecutive annual dividend increase. At the same time, it announced a special cash dividend of $2.00 per share, reflecting the company’s commitment to return value to shareholders with its strong cash generation capabilities.
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 2015, the Zacks Consensus Estimate over the past 30 days remained stable at $4.86 per share, while for 2016 it increased by a penny to $5.38 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 stocks in the finance space include Legg Mason Inc. LM, Commerce Bancshares, Inc. CBSH and Huntington Bancshares Incorporated HBAN. All 3 carry a Zacks Rank #2 (Buy).
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