T. Rowe Price Group reported Wednesday that profit rose 22 percent in the quarter from a year ago to $241.9 million, buoyed by an uptick in the market that pushed assets under management to a new record.
The Baltimore-based money manager earned 91 cents a share, beating analysts' expectations of 89 cents.
Still, Price's stock closed Wednesday down by more than 4 percent, at $72.75 per share, because of lower-than-anticipated cash inflows.
"The flows were a little on the disappointing side," said Jeffrey Hopson, a senior analyst with Stifel, Nicolaus & Co. in St. Louis. Hopson said his firm expected Price's net inflows would reach about $5 billion in the quarter; instead, they came in at $3.3 billion.
Assets under management reached a record $617.4 billion in the first quarter, a $40.6 billion increase since the end of last year. Most of that increase — $37.3 billion — comes from market appreciation and investment income.
Cash flowing into Price's mutual funds in the quarter totaled $7.6 billion, mostly into stock funds. That's the strongest quarter the company has had in years, said Price president and CEO James A. C. Kennedy.
But the company also saw an outflow of $4.3 billion from other investment portfolios after large redemptions from institutional investors outside the United States "who changed their investment objectives," Price reported.
Revenue for the first quarter totaled $815.7 million. In comparison, Price earned $197.5 million, or 75 cents per share, on revenue of $728.7 million for the same quarter a year ago.
"It was better than expected from an earnings-per-share standing. That was largely a function of higher margins as well as higher nonoperating income," said Michael S. Kim, an analyst with Sandler O'Neill & Partners in New York.
Price realized $11.4 million in gains by rebalancing funds in the quarter.
Kennedy said that he remains optimistic about the equity market, but added that it can't sustain its recent level of growth.
"My concern is about the pace of the U.S. equity market," which was up more than 10 percent in the first quarter, he said. "The pace will slow down."
Operating expenses in the quarter rose by $30.6 million from a year earlier to $443.1 million. More than half of the increase is largely due to higher salaries and a rise in temporary employees. Price employees numbered 5,408 at the end of the quarter, up about 3 percent from a year ago.