Morningstar

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

Market losses and outflows led to the firm losing nearly 25% of its assets under management during 2022.

""
Securities In This Article
T. Rowe Price Group Inc
(TROW)

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.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

Consumer Defensives: Despite Angst, Thirsty Investors Have Names to Pursue

Estee Lauder, Kraft Heinz, and Dollar General are our top consumer defensive stocks.
Erin Lash, CFA

Industrials: Many Stocks Overvalued After Q3 Outperformance

Our top stocks in this sector are Chart Industries, Wesco, and CNH Industrial.
Brian Bernard, CFA, CPA

Basic Materials: Despite Index Rise, We See Multiple Long-Term Opportunities

In this sector, our favored stocks are Albemarle, Dow, and FMC.
Andrew Bischof, CFA and Travis Miller

About the Author

Greggory Warren, CFA

Strategist
More from Author

Greggory Warren, CFA, is a strategist, AM Financial Services, for Morningstar*. He covers the traditional US- and Canadian-based traditional asset managers, as well as the alternative asset managers and Berkshire Hathaway. Over the course of his career, Warren has covered not only financial services names but companies from the consumer staples and consumer cyclicals sectors, and been involved in portfolio stock selection and management.

Prior to joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than eight years, covering consumer staples and consumer cyclicals. Before assuming his current role at Morningstar in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered the non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago.

During 2014-19, Warren was selected to participate each year on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

Sponsor Center