T. Rowe Price ( TROW) expects first-quarter earnings to rise 80% from the war-afflicted year-ago period, guidance that comes about a penny short of existing estimates. The company earned 31 cents a share last year, meaning Thursday's guidance works out to about 56 cents a share. Analysts polled by Thomson First Call had been forecasting earnings of 57 cents a share, on average. The shares were recently down 9 cents, or 0.2%, to $54.48 on the Instinet early session. The Baltimore-based fund shop also predicted first-quarter revenue will rise 40% from last year's $219 million, bringing them to about $307 million. Analysts surveyed by Thomson First Call had been forecasting revenue of $299 million. The company issued a measured view of financial markets in 2004, saying that barring a large-scale external shock, the outlook remains very good. Its main concern is interest rates. "The economy continued on a growth path in the first quarter, assisted by the strong financial markets and the improvement in foreign economies," T. Rowe Price said. "The labor market is also improving, but continued gains are essential for growth in the second half. Inflation has been held in check so far by robust productivity gains that restrain labor costs. Rising raw materials costs are an early indicator that inflation should remain a concern, given the high levels of monetary and fiscal stimulus, the large trade deficit, the increased military expenditures, and the weakening dollar. "Interest rates are likely to start trending higher, particularly as signs of gathering strength in the labor market are beginning to emerge. Rising interest rates usually put downward pressure on bond prices, and we expect bond returns this year to be more a result of their coupon yields than the combination of yields plus appreciation we experienced in 2003," the company said.