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T. Rowe Price earnings rise 12 percent in third quarter

T. Rowe Price Group Inc.'s earnings rose 12 percent in the third quarter of 2014, with a decline in client money managed by the Baltimore-based firm offset by a rise in investment advisory revenues.
T. Rowe Price Group Inc.'s earnings rose 12 percent in the third quarter of 2014, with a decline in client money managed by the Baltimore-based firm offset by a rise in investment advisory revenues. (Algerina Perna / Baltimore Sun)

Despite market swings that reduced the assets it manages, T. Rowe Price Group Inc.'s earnings rose 12 percent in the third quarter of 2014, driven by a rise in investment advisory revenues.

The money manager made $303.6 million in the quarter ended Sept. 30, compared to $270.3 million in 2013's third quarter, the company reported Thursday. On a per-share basis, it earned $1.12, up from $1 a year earlier.

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Revenue reached $1 billion for the quarter, up from $884.4 million in the same quarter last year.

Assets managed by the firm were $731.2 billion at the end of September, down $7.2 billion from the three-month period ending in June. The company attributed the decline to volatility in global markets.

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James A. C. Kennedy, the company's president and CEO, said he remained focused on the company's long-term strategy.

"I'm much more focused on what we're doing over the next few years," Kennedy said. "I'm not jumping up and down thinking about the quarter, nor am I depressed about the quarter."

T. Rowe's stock closed up 33 cents a share at $77.32 each in Thursday trading.

Mac Sykes, an analyst at Gabelli & Co. in Rye, N.Y., called it an "uneventful" quarter for T. Rowe, with slightly higher operating expenses than analysts anticipated.

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"On the earnings side it was a little bit less than we would have expected," Sykes said. "But we continue to think they're very well positioned for the future."

Sykes said he thought it was interesting that T. Rowe repurchased 3.2 million shares of its common stock in the third quarter, for a total of 3.9 million shares in all of 2014.

"I would expect to see a step-up in share repurchases, which I think will support the stock price and benefit shareholders over the long term," Sykes said.

Revenue from investment advising — the bulk of the firm's revenue — jumped $122.4 million to $890.7 million compared to the same quarter last year. Year-over-year, assets managed by the firm were up $103.2 billion, or 16 percent, on average compared to the third quarter of 2013.

T. Rowe said 80 percent of its mutual funds outperformed averages over a one-year period, and 100 percent of target-date retirement funds outperformed averages for the three- and five-year periods ending in September.

The money manager spent more on operating costs in the quarter — up $73.6 million to $532.1 million over the same quarter last year — with most of the increase the result of higher compensation costs. The number of people employed by the company rose nearly 5 percent in the quarter to 5,824 employees.

"We're investing for the future, investing in our people, investing in technology," Kennedy said. "We're going to continue to do our very best for our clients."

The firm also spent more than $9 million more on occupancy and facility costs in the quarter compared with the year before, with about a third of the increase the result of the firm's opening two new buildings at the Owings Mills campus late last year.

This week the U.S. Securities and Exchange Commission rejected a proposal by two firms to open a new type of "nontransparent" exchange-traded fund for which T. Rowe also is seeking approval. T. Rowe spokesman Brian Lewbart said the firm still is pursing approval for the fund, which wouldn't disclose its holdings daily.

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