T. Rowe Price: Buy Rating on Margin Discipline and Macro Recovery

We initiate on TROW with a Buy and $125 PT. T. Rowe Price Group is a global asset manager offering

equity & fixed income investment products and services for individual and institutional customers in North America, Europe, and the Asia-Pacific. While the market is anchored by the persistent outflows & fee compression story, a deeper analysis reveals a business quietly repositioning to outperform once industry dynamics reset. Multiples vs. earnings power is our window: TROW trades at 10.7x fwd P/E, an uncharacteristic and wide discount vs historical and peers, but management’s cost discipline and increased buyback activity set up for margin expansion and resilient capital return, in our view. We arrive at FY26 EPS of $9.60 with 1%-3% expense growth and 1.3% recurring share count reduction, driving estimates 9%-13% above consensus through 2026. These levers underpin earnings resilience and attenuate the % impact of ongoing fee rate pressure, with our base case of 39bps effective fee in 2025. Add to this a macro backdrop likely off the peak tightening cycle with real rates stabilizing and policy headwinds turning tailwinds once the 2024 US presidential election passes, and the pathway for re-rating to 13.0x EPS – consistent with a more normalized pre- dislocation – emerges, though we build our PT on current more modest sector outlook. If the inflation pressures show signs of accelerating, the multiple could stay anchored at the current trough, trimming upside, though the balance sheet remains zero long-term debt and the double-digit