- The Washington Times - Monday, October 27, 2003

Shares of T. Rowe Price Group Inc. ended their weeklong slide after the company said investor confidence in the stock market was boosting its revenue.

The Baltimore-based investment-management firm said Friday that third-quarter net income rose to $66.3 million, (51 cents per share) from $43.2 million (34 cents) in the third quarter of 2002. Shares rose 95 cents to close at $40.45 on the Nasdaq Composite Index yesterday.

T. Rowe Price benefited over the past three months from the strong stock market, which encouraged many investors to open new accounts, seek financial advice and add to their portfolios, analysts said.

The company increased the amount of assets under its management from $139.2 billion for the third quarter of 2002 to $166.4 billion during the comparable period this year. Meanwhile, fees for investment advice climbed from $168.6 million to $205.2 million during the same period.

“As the market has returned to levels not seen in over a year, we continue to benefit from the performance of our managed investment portfolios,” T. Rowe Price Chairman and President George A. Roche said in a statement.

The improved financial performance by T. Rowe Price surprised some analysts, many of whom had predicted earnings would be about 3 cents per share lower than what the company reported.

Merrill Lynch said yesterday it was raising its end-of-year-earnings estimate for the company from 49 cents to 50 cents per share. It also raised its estimates for 2004 earnings, from $2.07 to $2.18 per share.

T. Rowe Price shares had shown signs of a slump, falling more than $2 last week alone. Analysts said the decline was likely the result of some profit-taking by investors looking to cash in on the stock’s dramatic rise this year.

Shares had risen to more than $44 by the end of September; they had been as low as $24 in February. T. Rowe Price stock has been the biggest gainer in the Standard and Poor’s 500 Asset Management and Custody Banks Index.

Analysts said T. Rowe Price is an attractive stock because of the earnings growth, but that some investors would prefer a higher dividend.

“[W]e believe [T. Rowe Price] will stack up cash rather than spend it on dividends or stock buybacks, providing less immediate gratification to shareholders than some other firms,” Merrill Lynch analyst Guy Moszkowski wrote in a research report.

Analysts downplayed news that T. Rowe Price has been in contact with the Securities and Exchange Commission and other authorities as part of an inquiry into improper trading of fund shares.

New York Attorney General Elliott Spitzer has been examining whether large, wealthy investors were given special trading privileges by some mutual fund companies. Specifically, Mr. Spitzer has looked into illegal after-hours trading and “market timing,” in which investors seek to profit by capitalizing on the fast buying and selling of fund shares.

Mr. Roche said last week that the inquiries were industrywide, and he condemned the practices of market timing and after-hours trading.

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