T. Rowe Price Group Inc. reported yesterday that fourth-quarter profit rose 28 percent as investors continued to put money into the Baltimore investment company's mutual funds despite market volatility.
Price's net income increased to $190.7 million, or 68 cents per share, from $148.9 million, or 53 cents per share. Earnings beat Wall Street expectations of 63 cents per share, according to Bloomberg, though the company has consistently stayed away from providing earnings guidance to analysts.
Assets under management reached a record $400 billion, up $3.2 billion from the third quarter.
Price saw $9.1 billion in total new investment during the quarter, offsetting stock market losses of $5.9 billion amid a widening credit crisis and rising energy and other costs.
"The bottom line is that our clients feel we've done a good job over time, and they continue to give us more money to manage," James A.C. Kennedy, Price's chief executive, said yesterday in a phone call from London.
Inflows from retirement funds, which adjust to become more conservative as the investor ages, remained solid - accounting for 37 percent of deposits in the quarter. These funds grew $2.9 billion, or 11 percent, during the quarter to reach $30 billion.
Some analysts noted Price's growth in these funds, which now represent 12 percent of the company's mutual funds assets under management.
"Retirement funds continue to be a major driver of net flows and continue to be one of the best in the industry," said D.J. Neiman, an associate analyst at William Blair & Co., who does not own stock in the company. "We continue to see the retirement market as a source of stability in volatile markets."
Price's revenue in the fourth quarter rose 22 percent to $597.8 million, compared with $489.1 million in the corresponding period last year. Shares rose 56 cents to close at $52.84 yesterday.
The company's net profit in 2007 rose nearly 27 percent to $670.6 million, from $529.6 million in the year-ago period. Revenue was $2.2 billion last year, up from $1.8 billion in 2006. Assets under management rose $65.3 billion to $400 billion.
Michael Hecht, an analyst at Banc of America Securities, which prohibits analysts from owning stocks they cover, reiterated in a research note yesterday that money flowing into retirement plans might slow as baby boomers begin to retire and stop contributing to retirement accounts. Hecht also lowered his 2008 earnings estimate because of the weak stock market and higher-than-expected expenses in the quarter.
The largest expense was compensation and related costs, which increased $43 million, or 26 percent, to $207.2 million.
In the past year, the company has increased its staff by 10 percent to 5,801 associates to handle more clients, and more of their money. It opened a customer service call center in Colorado Springs, Colo., renovated its headquarters in Baltimore and announced plans to expand its Owings Mills campus.
"We're investing for our clients," Kennedy said, "trying to get even better over time."