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Citi Research analyst Christopher Allen upgraded T. Rowe Price Group (NASDAQ:TROW) stock to Neutral from Sell on Tuesday on the expectation that flow pressures could start to moderate next year.
A moderation in outflows could come to fruition if “relative performance can continue to improve and we have a reasonable equity market backdrop,” the sell-side analyst wrote in a note.
Allen attributed the stock’s downward spiral in recent months to persistent outflows. He thinks outflows will continue in Q4 “with seasonal pressure and the impact of a sub-advised mandate loss.”
Unless Q4 outflows come in weaker than expected or if there is evidence of incremental fee pressure, he noted, “we are not expecting further pressure from here.”
Similarly, T. Rowe Price (TROW) President and CEO Robert Sharps noted net flows “haven’t seen any improvement” and the asset manager doesn’t see any improvement through year-end, he said during the company’s Q3 earnings call conference.
“We do expect flow trends to recover somewhat in 2024 as improved performance takes the pressure off of redemptions from US large cap equity products,” he added.
As such, Allen now expects Q4 adjusted EPS to be $1.61, vs. $1.47 average analyst estimate, down from his prior estimate of $1.83. 2024 adjusted EPS is expected to be $6.80, vs. $6.81 consensus, compared with $7.44 in the prior view.
