T. Rowe Price Group reported a 20 percent increase in earnings for the second quarter Wednesday, but a decline in assets under management when investors withdrew money contributed to a sharp sell-off of the company's stock.
The Baltimore-based money manager said it earned $247.8 million in the April-to-June quarter, about 20 percent higher than the $206.8 million it earned a year ago. On a per-share basis, Price earned 92 cents for the quarter, three cents less than analysts expected, but more than its 79 cents profit a year earlier.
Assets under management at the end of June totaled $614 billion, compared with $576.8 billion a year earlier. But since March, Price has seen net outflows of $8 billion, partially offset by $4.6 billion in market appreciation and income.
"This is perhaps the lowest flow total for [Price] in at least 12 years and perhaps ever," said Christopher Harris, a senior analyst with Wells Fargo, in a research note.
The news sent Price's shares tumbling. Its stock closed Wednesday at $75.61 per share, down $3.98, or 5 percent.
Price said the majority of outflows came from a small number of institutional and intermediary clients who switched their objectives or strategies.
"Nobody has mentioned performance, which is good news for us," said James A.C. Kennedy, Price's CEO and president.
Kennedy noted that Price's fund performance remains strong, with 83 percent of its funds outperforming Lipper averages over a five-year period.
He also pointed to Price's record revenue in the quarter, up 16 percent over a year go.
Revenue for the quarter reached $854.3 million, compared with $736.8 million a year ago. Most of Price's revenue comes from investment advisory fees, which rose to $739.7 million in the quarter, an increase of about 17 percent from a year ago.
Price paid $2.8 million to terminate leases at the end of May. The company closed nine of its 15 investor centers outside Maryland during the quarter.
Clients were using those centers less and conducting more of their business online or over the phone, Kennedy said. Thirty-eight employees were affected by the closures, although 11 accepted other positions with Price.