NEW YORK — T. Rowe Price (TROW) closed at $103.29, up 1.14 percent, outperforming the S&P 500's 0.58 percent gain. The outperformance masks underlying weakness: TROW has fallen 1.96 percent over the past month while the S&P 500 advanced 0.97 percent.
Analysts expect TROW to report third-quarter earnings per share of $2.59, down 7.83 percent year-over-year. Revenue is projected at $1.95 billion, up 3.22 percent. For the full year, consensus calls for EPS of $10.1 (up 3.91 percent) and revenue of $7.68 billion (up 4.96 percent).
The problem: analyst sentiment is deteriorating. The consensus EPS estimate for TROW has declined 0.67 percent over the past month, a warning sign of softening expectations heading into earnings.
On valuation, TROW trades at a forward P/E of 10.12, slightly below the financial services industry average of 10.5. But the company's PEG ratio of 2.98 compares unfavorably to the industry average of 1.12—a red flag. A PEG above 2 suggests the market is pricing in growth that may not materialize.
Zacks has assigned TROW a Hold rating (#3 rank). The Financial - Investment Management industry ranks 213rd out of 250 classified industries, placing it in the bottom 14 percent. Industries in the top half outperform those in the bottom half by a factor of 2 to 1.
