A week ago, T. Rowe Price Group, Inc. (NASDAQ:TROW) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. The company beat forecasts, with revenue of US$1.8b, some 2.8% above estimates, and statutory earnings per share (EPS) coming in at US$2.49, 26% ahead of expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, T. Rowe Price Group's nine analysts are now forecasting revenues of US$7.05b in 2024. This would be a satisfactory 5.7% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to reduce 2.5% to US$8.26 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$7.07b and earnings per share (EPS) of US$8.23 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$115. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic T. Rowe Price Group analyst has a price target of US$125 per share, while the most pessimistic values it at US$101. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting T. Rowe Price Group's growth to accelerate, with the forecast 7.6% annualised growth to the end of 2024 ranking favourably alongside historical growth of 4.1% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.9% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that T. Rowe Price Group is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple T. Rowe Price Group analysts - going out to 2026, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for T. Rowe Price Group (1 doesn't sit too well with us!) that you should be aware of.
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