Pali Research Upgrades T Rowe Price (TROW) to Neutral; Raises 2009-10 Estimates

October 26, 2009 8:27 AM EDT

Pali Research upgrades T Rowe Price (Nasdaq: TROW) to Neutral.

Pali analyst says, "TROW reported EPS of $0.50, well ahead of our estimate on better revenue, lower compensation, and lower marketing costs. Flows of $7.4bn were also much better than our estimate. We have maintained a sell on TROW since our initiation on May 7th when the premium to the group was 40%; it is now 30%. T. Rowe had underperformed the group up until this week. Our bearish view on TROW was predicated on potential retirement regulation, an unfavorable business mix considering industry trends (international equity and fixed income), and valuation. Retirement regulation appears to have been stymied by other issues (healthcare). TROW’s flows last quarter did underperform due to their exposure to U.S. equities. However, this quarter, fixed income surprised to the upside. We also suspect that greater allocations are coming for equity, where TROW is best in class. TROW is one of few asset managers (also EV & LM) that could potentially benefit from some dollar stabilization."

"If flows start coming back into U.S. equities, and allocations shift to equity from fixed income, TROW can go from a consistent underperformer this year to an outperformer in Q4...We are raising our 2009 and 2010 EPS estimates to $1.57 and $2.14 from $1.44 and $1.90 previously. The revision reflects better than previously anticipated flow in Other Portfolios as well as lower comp expense."

To see more analyst ratings on TROW Click Here.

T. Rowe Price Group, Inc. is a publicly owned holding investment manager.

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