T. Rowe Price Associates Inc. said yesterday that it had surprisingly strong earnings for the three months that ended in June, sparking a rally in shares of the Baltimore mutual fund company.
Price's report that it earned $18.2 million, or 60 cents a share, during the second quarter sent its shares up $1.75, to $40, on volume of 258,700 shares.
Price's report was one of two bullish pieces of news about the fund industry that hit Wall Street yesterday. Franklin Resources Inc., a San Mateo, Calif., firm that is the biggest publicly traded mutual fund company, saw its stock rise $4 to $47.50 after it, too, posted strong second-quarter results.
"Increased revenues earned on record mutual fund assets under management (AUM) drove the company's performance," Price President George J. Collins said in a statement.
Analysts who follow Price had expected profits to be 54 or 55 cents a share, according to Nelson Publications and Zacks Corporate Earnings Estimator.
Price said the key to the quarter was continued strong "inflows" of customer money to be invested in funds and other assets Price manages for clients. The firm gets its revenues from fees on the $66 billion in client assets it manages. Customers added $800 million to Price's mutual funds during the quarter, the same amount as they did during the first three months of the year.
"The earnings were quite a bit better than we expected," said James Hanbury, who follows Price for Schroder Wertheim & Co. in New York. "The market and the inflows were both very good. And they had slightly lower advertising expenses. Therefore, up go the earnings."