T. Rowe Gains Record AUM of $1.518 Trillion in Q1
We are maintaining our fair value estimate for the wide-moat firm.
There was little in wide-moat rated T. Rowe Price's (TROW) first-quarter results that would alter our long-term view of the firm. We are leaving our $170 per share fair value estimate in place. T. Rowe Price closed out the March quarter with a record $1.518 trillion in managed assets, up 3.2% sequentially and 52.6% on a year-over-year basis. Net inflows of $1.2 billion during the first quarter were slightly worse than our expectations, which we had expected to be more on par with the $2.1 billion quarterly run rate we've seen from the firm the past five years. Even so, we still see the firm generating low-single-digit organic AUM growth this year as the company moves closer to the time when retiring baby boomers are less of a drag on its flows.
While average AUM was up 29.8% year over year during the March quarter, T. Rowe Price reported a 24.9% increase in revenue when compared with the prior-year's period, due to product mix shift and a slight decline in the firm's effective fee rate. We still envision full-year top-line growth coming in at a low-double-digit rate this year, with revenue expanding at a mid-single-digit rate during 2021-25. As for profitability, adjusted GAAP operating margins of 48.9% during 2021 were 50 basis points higher than the year-ago period, as expenses rose at a slightly slower rate than revenue. Full-year profitability still looks on course to end up the year at around 45% (compared with the adjusted GAAP operating margin of 44.2% that T. Rowe Price put up in 2020). Our five-year forecast calls for operating margins in a 44% to 46% range, as the firm continues to invest in key regions and channels to help drive growth.
T. Rowe price increased its quarterly dividend 20% to $1.08 during the first quarter, which implies a yield of 2.4% based on today's trading price on the shares. The company also repurchased 1.6 million shares for $268 million during the March quarter.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.