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T. Rowe Price earnings up 9 percent in second quarter

Baltimore-based money manager T. Rowe Price Group earned $333.2 million between April and June, 9 percent more than the same period last year.

Earnings for the quarter were $1.24 per share, beating analysts' consensus estimate of $1.20, and up from $1.13 a year earlier.

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Revenues were $1.07 billion in the second quarter, up 9 percent over the same period last year.

Client assets managed by the firm were $773 billion, up slightly from $772.7 billion at the end of the prior quarter. Clients invested $2.9 billion in U.S. mutual funds, but pulled $2.6 billion out of the firm's other investment portfolios.

"I thought the quarter was basically in line with expectations," said James A.C. Kennedy, the company's president and CEO. "Our performance is the key part and our performance continues to be very strong, so I'm very pleased with that."

The company said 76 percent of its mutual funds outperformed the Lipper averages for the three-year period that ended in June, while 80 percent outperformed for the five-year period, 86 percent outperformed for the 10-year period and 78 percent outperformed for the one-year period.

As for investors pulling money out of the firm's other investment portfolios, Kennedy said it was "roughly in line with expectations" as "a handful of institutional clients are moving their funds from large-cap U.S. investments to international investments."

Yet some analysts were concerned with the outflows in the company's other investment portfolios.

"It's definitely muting their growth potential," said Mac Sykes, an analyst at Gabelli & Co. in Rye, N.Y.

T. Rowe Price shares fell $1.46 to close at $77.28 in New York Stock Exchange trading. The company's stock price has fallen over the past year from $82.25 a share.

The company distributed a special $2 a share dividend during the second quarter and spent $385 million to repurchase 4.8 million shares, or nearly 2 percent, of its common stock during the first half of the year.

"We were at a premium compared to our competitors and now we're not," Kennedy said. "We think the stock looks pretty attractive. That's why we bought back shares."

The increase in earnings was tempered somewhat by a 10 percent increase in operating expenses to $564.6 million. T. Rowe Price boosted its staff by 4 percent over the same period a year before and now employs nearly 6,000. The company said it increased salaries for employees at the beginning of the year, and related expenses also rose.

Kennedy said he is pleased with the company's overseas growth and that the firm expects to continue hiring. He said T. Rowe Price has 115 employees working in international equity, and their performance has been strong.

"The investment we've been making for the last several decades is paying off," he said.

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