T. Rowe Price Group Inc. (TROW) has been rated "Neutral" by Citi following its weaker-than-expected Q4 2024 results, which saw a decline in top-line performance and fee rates due to ongoing mix shift dynamics. Citi has lowered its EPS estimates for 2025, 2026, and 2027 to $9.05, $9.59, and $10.14, respectively, from previous estimates of $9.37, $9.78, and $10.32, citing persistent fee rate pressures. Despite these challenges, management noted improving flow momentum, with stronger gross sales and a robust net pipeline, although outflows are still anticipated in 2025.
Citi maintains a price target of $120, based on a valuation of 13x its 2025/2026 EPS estimates, aligning with historical averages. Management has guided for a 4-6% y/y increase in adjusted operating expenses for 2025, including a $20-30 million one-time rent impact as TROW moves into its new headquarters. The company is exploring structural ways to reduce expenses over time, focusing on investments to drive efficiencies.
TROW's strategic partnership with Aspida and discussions with Ares highlight its focus on expanding in the insurance channel and exploring opportunities in the alternatives space, particularly in the DC/401(K) market. Management is optimistic about the momentum heading into 2025, with improving redemption rates in historically pressured areas like large-cap growth.
TROW closed at $110.70 on February 5, 2025, reflecting a 4.2% decline from the previous close.