T. Rowe Price Continues to Hold Its Own in a Difficult Market for Growth Equities

T. Rowe Price Stock at a Glance

• Current Morningstar Fair Value Estimate: $120
• T. Rowe Price Stock Star Rating: 3 Stars
• Economic Moat Rating: Wide
• Moat Trend Rating: Stable

T. Rowe Price Earnings Update

There was little in wide-moat-rated T. Rowe Price’s (TROW) fourth-quarter results that would alter our long-term view of the firm. We expect to leave our $120 per share fair value estimate in place. The fourth quarter closed out a horrible year for the asset manager, with the firm losing nearly 25% of its assets under management, or AUM, to a combination of market losses ($351.4 billion) and outflows ($61.7 billion) during 2022. While most of the decline in managed assets last year came from market losses—with T. Rowe Price’s growth equity-heavy platform being hit hard by the decline in technology and other growth stocks—the firm’s organic AUM growth rate of negative 3.7% last year was troubling for a company that has rarely had outflows historically. That said, T. Rowe Price’s overall organic AUM growth rate last year was slightly better than the negative 4.3% rate seen for actively managed equity funds during 2022 (based on data provided by Morningstar Direct).

T. Rowe Price reported mixed fourth-quarter adjusted earnings per share of $1.74, beating both the FactSet consensus of $1.73 and our own estimate of $1.72. The company closed out the December quarter with $1.275 trillion in managed assets, up 3.6% sequentially but down 24.5% year over year. Net outflows of $17.1 billion during the fourth quarter were an improvement on the third quarter ($24.6 billion) but were still well off the $8.8 billion quarterly run rate for outflows seen during the preceding eight quarters. With average AUM down 22.3% year over year during the fourth quarter, T. Rowe Price reported a 22.3% decline in total revenue for the period. The company’s full-year top-line decline of 15.4% was slightly better than our forecast calling for a 16.8% revenue decline during 2022. As for profitability, full-year adjusted operating margins of 38.5% were 1,150 basis points lower than the year-ago period and in line with our projections.