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What’s in Store for T. Rowe Price in Q2 2018?

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Earnings expectations

T. Rowe Price Group (TROW) exceeded analysts’ expectations on earnings per share and revenues in the first quarter. The new US tax law, which helped corporations reduce their tax liabilities, also helped T. Rowe Price realize YoY (year-over-year) growth in its diluted EPS. The company’s investment advisory revenues largely depend on its total assets under management (or AUM), which further affects its net revenues.

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T. Rowe’s total AUM has a direct relationship with the equity markets. A rise in the markets would boost its total AUM while a decline would reduce the total AUM. Wall Street analysts gave an average estimate on T. Rowe’s EPS of $1.80 for the second quarter, which implies an increase on a YoY basis. However, they gave a high EPS estimate of $1.90 and a low EPS estimate of $1.70.

T. Rowe’s second-quarter revenues

Wall Street analysts gave an average estimate on T. Rowe’s revenues of $1.33 billion, reflecting an increase YoY. However, they gave a low estimate of $1.32 billion and a high estimate of $1.37 billion. 

In comparison, asset managers (XLF) State Street Corporation (STT), BlackRock (BLK), and Franklin Resources (BEN) are expected to report revenues of ~$3.1 billion, ~$3.6 billion, and ~$1.6 billion, respectively, in the June quarter.

In the second quarter, T. Rowe’s performance would primarily be determined by the performance of the equity markets as well as by its investment performance. However, net flows along with investor sentiment would also impact the company’s second-quarter performance.

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