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T. Rowe Price reports earnings up 1.7 percent

T. Rowe Price Group reported Wednesday a small increase in earnings for the first quarter of 2015 as higher expenses acted as a slight drag.

The Baltimore-based money management firm earned $309.5 million in the January-to-March period, an increase of 1.7 percent from $304.3 million in the same period last year. Earnings per share rose a penny to $1.13, one cent lower than analysts expected.

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The company's stock closed down 21 cents at $82.59 a share in Wednesday trading.

Revenue rose to more than $1 billion, up 7.6 percent from the same period last year, but operating expenses, including compensation and capital expenditures, rose more, the company said Wednesday. Operating expenses for the quarter were $549.2 million, up about 8.6 percent from a year ago.

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Still, Michael Carrier, a research analyst at Bank of America Merrill Lynch, wrote in a report that T. Rowe Price had a "decent" quarter, citing solid investment performance and rising cash, among other factors.

The firm ended the period with $772.7 billion in assets under management, up an average of 8 percent over the first three months of 2014 and up $25.9 billion, or 3.5 percent, from the prior quarter. The growth included net cash inflow of $1.9 billion — a reversal of the previous quarter.

Christopher Harris, a senior analyst at Wells Fargo, wrote Wednesday that the inflow figure — dragged down as institutional investors continued to pull money from the company — was "disappointing."

Price CEO James A.C. Kennedy said the firm has been working to boost the investment options available to clients, as well as its distribution reach. He highlighted a $7.5 billion surge among noninstitutional clients, as people placed money in target-date retirement funds.

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The actions of institutional investors typically are guided by specific concerns, he said.

"Those flows are just naturally going to be more erratic," he said.

Kennedy said the company remains in a strong position, pointing to the performance of its funds relative to those of competitors.

"That's why people continue to trust us with money under management and that's why over time we'll continue to attract more money under management," he said.

T. Rowe Price predicted capital expenditures of up to $175 million in 2015, due to investments in technology and upgrades at its Owings Mills campus. The company employed about 5,900 people at the end of March, an increase of 3.7 percent since 2014.

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