T. Rowe Price Group (NASDAQ: TROW) is set to report its first-quarter earnings before the market opens on Thursday, but the numbers are already drawing scrutiny. The Baltimore-based asset manager disclosed $13.7 billion in net outflows for the quarter, with assets under management (AUM) slipping to $1.71 trillion by the end of March, down from $1.80 trillion in February. This decline puts additional pressure on fee revenue, a key profit driver for the firm.
Analysts are bracing for a challenging report. Consensus estimates from Investing.com project first-quarter earnings per share (EPS) of around $2.36 on revenue of $1.87 billion, while MarketBeat sees a slightly higher EPS of $2.44 on revenue of $1.88 billion. The company's stock closed at $100.47 on Wednesday, down 0.30%, and traded at $98.72 in premarket activity, signaling investor caution ahead of the release.
The outflows come at a time when active managers face intense competition from lower-cost passive funds, ETFs, and private-market investments. T. Rowe Price's struggles stand in stark contrast to peers like BlackRock, which reported $130 billion in net inflows in Q1, driven by its iShares ETF lineup and alternative products. Invesco logged $21.8 billion in long-term net inflows, and Franklin Templeton posted $16.9 billion, further highlighting the divergence in performance.
Wall Street analysts have trimmed their expectations. JPMorgan's Kenneth Worthington cut his price target on T. Rowe Price to $103 from $106, maintaining an Underweight rating. Barclays also reduced its target to $87 from $94, citing updated flow and AUM models. Morgan Stanley's Michael Cyprys lowered his target to $105 from $107, noting a 3.1% annualized organic decay rate in net flows, though he raised his Q1 EPS estimate to $2.52.
Despite the headwinds, T. Rowe Price remains committed to its dividend, which it increased to $1.30 per share in February, marking a 2.36% rise and extending a 40-year streak of annual dividend hikes. However, analysts caution that sustained outflows and fee compression could threaten the dividend's sustainability if earnings continue to deteriorate.
Management's commentary on Thursday's earnings call will be closely watched. CEO Rob Sharps and CFO Jen Dardis are scheduled to field questions at 8:00 a.m. ET, with Glenn August, CEO of Oak Hill Advisors—a key part of T. Rowe's push into private markets—also joining. Investors will seek clarity on strategies to stem outflows, manage expenses, and expand higher-fee alternative offerings.
The broader market context adds to the pressure. Active equity fund managers are losing ground to ETFs and index funds, while clients are increasingly allocating to private credit and real assets. T. Rowe's traditional stock and bond mandates have been particularly affected, with March alone seeing $3.2 billion in net outflows. The company's ability to pivot toward alternatives and stem client withdrawals will be critical in the coming quarters.
