Profits at T. Rowe Price Group Inc. increased 23 percent for the three-month period that ended in June, as a rising stock market pushed the amount of client money managed by the firm to a record high.
The Baltimore-based company said Thursday that assets under management as of June 30 increased to $738.4 billion, 20 percent more than the same time last year. The market-driven increase lifted firm net revenues, which rely on investment advisory fees, 15 percent to $984.3 million, it said.
But the increase was not quite as good as some analysts had hoped, with some reports issued after the earnings release calling the quarter "mixed" and "disappointing."
CEO James A. C. Kennedy blamed the mismatch between results and expectations on slower-than-expected growth in the overall economy. He said he is confident in the firm's performance over the long term.
"The basic fundamentals of the company are working really well," he said. "We don't spend a lot of time focusing on the quarter."
Over a one-year period, 80 percent of T. Rowe's funds outperformed the averages, according to Thursday's earnings release. Despite the performance, the firm recorded $200 million in net cash outflows, which Kennedy attributed to institutional investors who are rebalancing their portfolios and remain clients.
Kennedy said he expects slow growth — both worldwide and at T. Rowe — to continue, but sounded a cautionary note about whether Wall Street highs will continue to lead the firm to success.
"It looks pretty fully priced, relative to history," he said. "We're cautious … but if the world economy continues to putter along at a reasonable rate and the U.S. economy is part of that, then the company will likely see increased sales."
The company's net income for the second quarter rose 23 percent to $305.8 million, compared to $247.8 million in the same period last year. Earnings per share for the period were $1.13 — one cent higher than analysts had expected — and up from 92 cents in 2013.
Shares of T. Rowe stock fell $1.92 each to close at $80.33 in Thursday trading.
Analysts predicted the drop would be temporary. They praised the firm for keeping expenses — including compensation — down during the quarter.
"Given solid long-term outlook, we would see any weakness today as a particularly attractive opportunity to buy," an initial Deutsche Bank report said.
Kennedy said the firm expects much of its future growth to come from overseas. It is working to increase the assets under management from international clients from its current 6.2 percent, he said. The firm already has the investment capability in the international markets, he said.
"There's a lot of capability available, so therefore we expect a lot of our growth going forward to come from outside the United States," he said.
The company has about 5,750 employees worldwide and is hiring — there are about 250 openings, with many of the positions in operations and technology at the firm's Owings Mills campus in Baltimore County, Kennedy said.