T. Rowe Price Group on Tuesday reported a $232 million profit for the fourth quarter, a 23 percent increase from a year earlier.
The Baltimore-based investment firm earned 88 cents a share for the quarter ended Dec. 31. That's up from 73 cents a share a year earlier, but still a penny less than analysts expected.
Revenue reached $787.3 million for the quarter, compared with $671.6 million the year before. This, too, was slightly below analysts' expectations.
Price shares fell sharply in early trading, but recovered somewhat to close Tuesday at $71.61, down 57 cents a share.
Christopher Shutler, an equity research analyst with William Blair & Co. in Chicago, said investors were largely responding to the net investment flows, which were weaker than anticipated.
Price experienced net outflows of $4.2 billion in the fourth quarter, the first outflow since the third quarter of 2011. But thanks to market appreciation and income, assets under management overall grew by $2.4 billion in the fourth quarter to a record $576.8 billion.
James A.C. Kennedy, Price's CEO and president, said inflows by individual investors into the mutual funds were flat for the quarter. Most of the outflows came from institutional investors outside the United States lowering their exposure to higher-risk equities as well as moving out of some international separate account portfolios that had "performance issues," he said.
For the year, assets under management grew by $87.3 billion, with $70.1 billion of that attributed to income and market appreciation.
Shutler said outflows in the fourth quarter had been expected.
"This quarter was a challenge for most publicly traded asset managers," he said. "You had the U.S. election, which added uncertainty, then had the 'fiscal cliff' discussion, which scared a lot of retail investors."
But investor worries about stocks appear to have subsided.
Kennedy noted that there has been a big reversal with investors moving into stocks since the last week of December.
"That has been industrywide and for us as well," he said.
Price noted that as of the end of December, more than three-quarters of its mutual funds outperformed Lipper averages over three-, five- and 10-year periods. And 97 percent of its target-date funds, which get progressively more conservative as investors approach retirement, surpassed Lipper averages over those same time periods.
Investment advisory revenue from Price mutual funds distributed in the United States rose 21 percent, to $472 million, in the fourth quarter compared with a year earlier.
Because of low interest rates, Price continues to waive fees to maintain a positive yield in money market funds. The company waived $9.5 million in fees in the fourth quarter, and $35 million for all of last year. It expects to continue forgoing fees this year.
For the year, Price earned $883.6 million, or $3.36 a share, on $3 billion in revenue. In 2011, Price's profit reached $773.2 million, $2.92 a share, on revenue of nearly $2.75 billion.
Price, which employed 5,372 people as of the end of December, increased its staff by nearly 2 percent last year. The company plans to continue hiring here and abroad, and has a couple of hundred positions open in the Maryland area, Kennedy said.
twitter.com/eileenambroseCopyright © 2015, The Baltimore Sun