UPDATE 2-T. Rowe Price profit just misses Wall Street view

* Q2 EPS 59 cts vs. Wall St view 60 cts

* Total assets drop despite net inflows in Q2

* Shares down 4.7 percent
(Adds CEO interview, details on flows, analyst comment;
updates stock price)

BOSTON, July 23 (BestGrowthStock) – T. Rowe Price Group (TROW.O: )
said second-quarter net income rose 59 percent on higher
investment advisory fees, just missing Wall Street
expectations.

Shares of the Baltimore asset manager fell nearly 5
percent.

T. Rowe said on Friday that it had earned $158.5 million,
or 59 cents per share, up from $100.0 million, or 38 cents per
share, a year earlier.

The earnings were a penny less per share than the 60 cents
analysts had expected, according to Thomson Reuters I/B/E/S.

Higher costs may have driven down the shares. In a research
note, Ticonderoga Securities LLC analyst Douglas Sipkin wrote
that compensation costs were $9 million more than he had
estimated.

Sipkin also noted higher advertising costs, perhaps because
of pressure from low-cost exchange traded funds, increased
advertising by competitors and “negative sentiment around
mutual funds in general.”

T. Rowe Chief Executive Officer James Kennedy told Reuters
the company plans further spending on advertising, which could
rise as much as 30 percent for all of 2010. Last year, it
pulled back on advertising like other firms amid the financial
crash.

Assets under management rose to $391.1 billion on June 30
from $315.6 billion a year earlier, reflecting both investment
gains and new customer money.

But assets under management were down from $419 billion at
March 31. During the quarter, market depreciation more than
offset net inflows of $5.1 billion, the company said.

Since about 70 percent of T. Rowe’s assets are invested in
equities, higher than some peers, volatile markets have a big
impact on the firm. Still, the net inflows for the quarter were
noteworthy given the outflows other fund firms have begun to
report, such as Janus Capital Group’s (JNS.N: ) on Thursday.

Kennedy said the inflows reflected good performances for T.
Rowe’s mutual funds. More than 80 percent of the funds
outperformed peers over three and five years.

“People recognize that we have done well for the clients,”
Kennedy said.

Kennedy declined to comment on reports that T. Rowe is
exploring buying a stake in a Chinese asset-management firm,
following a similar deal it made last year to own a 26 percent
stake of India’s UTI Asset Management.

Shares of T. Rowe were down 4.7 percent at $47.13 in early
Nasdaq trading.

At Thursday’s close, the stock had fallen 12 percent for
the year to date, less sharply than the 14 percent decline for
the Dow Jones index of U.S. asset managers (.DJUSAG: ) as well as
rivals like BlackRock Inc (BLK.N: ) and Federated Investors Inc
(FII.N: ).

Net inflows of $10.3 billion to T. Rowe in the first
quarter had helped support its shares in the year so far.

Stock Invetsing

(Reporting by Ross Kerber; Editing by Lisa Von Ahn)

UPDATE 2-T. Rowe Price profit just misses Wall Street view