T. Rowe Price 2Q profit, revenue miss Street view

Associated Press

BALTIMORE (AP) — T. Rowe Price Group Inc. posted essentially flat second-quarter earnings on Wednesday, as higher expenses from hiring more workers and increasing pay largely offset revenue growth from investment fees.

Earnings and revenue both fell short of Wall Street expectations, and shares of T. Rowe Price fell nearly 3 percent in morning trading.

The Baltimore-based investment manager posted net income after distribution to restricted stock shares of $205.6 million, or 79 cents per share, for the April through June period. That was up slightly from $203.8 million, or 76 cents per share, in the year-ago period.

Revenue rose 3 percent to $736.8 million, from $713.7 million in the 2011 second quarter.

Analysts, on average, called for earnings of 81 cents per share, on revenue of $756.4 million, according to FactSet.

T. Rowe Price's largest revenue source, fees from managing mutual funds and other investments, rose 3 percent to $630 million. Revenue increased from administrative fees, as well as distribution and servicing fees.

But expenses rose nearly 6 percent to $408.8 million. The biggest expense line, compensation and related costs, was up 5 percent. T. Rowe Price said that increase was primarily due to growth of its work force by an average 2.3 percent compared with last year's second quarter. T. Rowe Price employed 5,265 workers at the end of June. Base salaries, variable compensation and employee benefits costs are also higher compared with a year ago.

Assets under management were $541.7 billion at the end of June, down $13.1 billion from the end of March. That decrease was largely due to market depreciation as stocks fell during the second quarter. Investors added a net $4.7 billion during the quarter, as deposits exceeded withdrawals, but the flow of new cash wasn't enough to offset falling markets.

About $2.8 billion of the net deposits from the latest quarter flowed into target-date portfolios of investors saving for retirement. Those portfolios adjust their mixes of stocks and bonds to take a more conservative approach as investors get closer to retirement.

Shares of T. Rowe Price fell $1.58, or 2.6 percent, to $59.10 in morning trading, regaining a bit of ground after an early selloff. The stock has traded as high as $66 and as low as $44.68 over the past 12 months.