T. Rowe Price (TROW) 1 Nov 24 2024 Q3 Earnings call transcript

T. Rowe Price's third quarter earnings call for 2024 painted a mixed picture of the company's financial health and growth prospects. The call, led by CEO Rob Sharps and CFO Jen Dardis, highlighted both challenges and opportunities for the asset management firm. Here's a closer look at the key themes and trends that emerged from the call.

Financial Performance

The company reported an adjusted earnings per share of $2.57 for the third quarter, up 18% from the same period last year. This growth was driven by higher average assets under management (AUM) and adjusted operating income. However, the call also acknowledged a $12.2 billion net outflow in the third quarter, which was higher than expected due to a large sub-advised variable annuity termination. Despite this setback, T. Rowe Price remains optimistic about reducing net outflows this year, with plans to launch innovative retirement solutions and expand its ETF business.

Investment Performance

In terms of investment performance, T. Rowe Price's long-term performance remains solid, with several of its equity franchises, including U.S. mid-cap value, U.S. equity research, integrated U.S. small mid-cap core equity, and integrated global equity, continuing to be top quartile performers for the 1-, 3- and 5-year time periods. The company's ETF franchise, particularly the semitransparent U.S. equity research ETF and the more recently launched transparent equity ETFs, also showed strong performance. However, underlying stock selection and an overweight towards U.S. equities were detractors for relative performance in the third quarter.

Growth Opportunities and Challenges

T. Rowe Price is expanding its ETF business and deepening its leadership in retirement with innovative new strategies. The launch of Personalized Retirement Manager and Managed Lifetime Income, both designed to provide retirees with stable and predictable monthly income, is a testament to the company's focus on retirement solutions. The company is also seeing increased client interest in co-developing and customizing target date capabilities, which could lead to further growth opportunities. However, the company faces challenges in the form of net outflows from variable annuities, which have been a significant part of its business but are now declining.

Market Outlook

The call provided insights into the broader market trends, with a focus on the active equity market and mutual funds, which have been in outflow for some time. The company expects sizable further improvement in active equities and expects to see more positive flows in the coming years. T. Rowe Price also sees opportunities in areas like insurance and private credit, particularly in the context of the current market environment and the potential for higher yields on underlying portfolio investments.

Conclusion

In conclusion, T. Rowe Price's third quarter earnings call highlighted both challenges and opportunities for the asset management firm. The company's solid long-term investment performance, coupled with its expansion into new areas like ETFs and retirement solutions, position it well for future growth. However, the net outflows from variable annuities and the broader market trends pose challenges that the company will need to navigate carefully. With a focus on innovation, efficiency, and expense discipline, T. Rowe Price is well-positioned to navigate these challenges and continue its growth trajectory.