What a difference a year -- and a scandal -- makes.

When asset managers T. Rowe Price ( TROW) and Alliance Capital ( AC) report first-quarter results next week, analysts expect the pair to show strong performances vs. easy 2003 comparisons.

Janus Capital Group's ( JNS) results due out April 28, however, are widely anticipated to show the lingering effects of the mutual fund scandal, which has led to significant and persistent asset outflows and a management shakeup, culminating in the resignation of CEO Mark Whitson on April 20.

Rising Tide Lifts Most Boats

Asset managers reporting substantial year-over-year earnings gains next week will not drop any jaws on Wall Street, since the group's results are being measured against last year's bear market bottom. As assets under management, or AUM, and trading volume surged with the 2003 bull market, so did the revenue -- and ultimately the earnings -- of asset managers. According to Keefe, Bruyette & Woods analyst Bob Lee, the average asset management company saw a healthy 33% year-over-year growth in AUM from March '03 to March '04.

Franklin Resources ( BEN), manager of the popular Templeton mutual funds, for example, showed a hefty 58% improvement from last year's earnings when it reported its second quarter results last week. Despite taking a $60 million charge relating to governmental investigations over improper trading, the company reported net income of $173 million, or 68 cents per share, up from $110 million, or 43 cents a share, a year earlier.

On top of the expanded revenue base, new money has continued to stream into funds straight through the first quarter of 2004. According to J.P. Morgan, equity mutual funds attracted $91 billion of new money in January and February alone, which represents almost half of full-year 2003 levels. March figures are not yet available.

T. Rowe Price has undoubtedly been a beneficiary of the bull market's largesse. AUM for the company is expected to come in at $200 billion for the first quarter of 2004, up from $140 billion at the same point last year. As a result, T. Rowe Price's CEO said earlier this month that he expects an 80% year-over-year increase in earnings from first-quarter 2003, which would put T. Rowe's earnings in line with the consensus estimate of 56 cents.

Analysts are expecting T. Rowe Price to report net income of $74.5 million on revenue of $300 million when it releases results April 27. Last year, the company had a profit of $39 million, or 31 cents a share, on revenue of $219 million.

Analysts say the main question facing T. Rowe Price after such a strong one-year performance -- the stock is up 66% since April 2003 -- is whether the company has moved too far ahead of its peers when it comes to valuation.

J.P. Morgan's William Tanona rates the stock "neutral" despite a positive view of the company, his only complaint being that the stock is overvalued against both its peers and brokerage stocks. Lehman Brothers analyst Mark Constant also offers T. Rowe Price a left-handed compliment, saying he anticipates strong organic growth from the company, but sees "better value" in some of its lower multiple competitors.

The Thomson First Call average P/E for the group is 17.16 in 2004 and 15.3 in 2005. T. Rowe Price currently trades at a P/E of 19.84 for 2004 and 16.8 vs. 2005 estimates.

Another factor behind T. Rowe Price's successful year was its ability to remain above the mutual fund market-timing scandal that has plagued the industry since last summer. Alliance Capital was named as a prime offender in the scandal and saw negative press and outflows because of it. Nevertheless, the company has since recovered in part due to an early settlement with the Securities and Exchange Commission and New York State Attorney General Eliot Spitzer.

Alliance settled with the SEC for $250 million dollars in December 2003. In a separate settlement with Spitzer, the company agreed to $350 million in fee reductions over five years.

Alliance Capital has already reported AUM as of March 31 of $482 billion, an increase of 69% from the $286 billion the firm held at this point last year. Traced down to the bottom line, analysts project Alliance to report 55 cents for the quarter vs. last year's 37 cents, a 48% year-over-year increase.

Analysts expect Alliance, which reports results April 29, to post net income of $164 million on $728 million in revenue. Last year, the company earned $109 million on revenue of $603 million.

KBW's Lee is expecting a solid quarter from Alliance, on the basis of the strong performance of what he considers the company's growth engines, its institutional asset management (i.e., managing corporate pensions) and high-net-worth business lines. As of March 31, Alliance's institutional assets grew to $270 billion from $114 billion in March 2003, and high-net-worth assets rose to $42 billion from $40 billion.

Alliance's retail business, however, was dragged down by the mutual fund scandal with assets rising to just $158 billion from $134 billion.

Lee says Alliance's early settlement helped the stock because it removed the overhang of uncertainty and gave "investors the ability to quantify the problem as soon as possible."

That's not to say the uncertainty is entirely gone. Prudential analyst John Hall is confident that Alliance will meet his first-quarter estimate of 56 cents -- 2 cents below the consensus estimate -- but he maintains a neutral rating on the shares due to the after-effects of the scandal.

"Our thesis has been that Alliance's growth rate should be slower than peers that haven't been implicated in any wrongdoing," says Hall.

Janus Remains Adrift

Unlike Alliance, Janus Capital Group has yet to settle with regulators over the market-timing scandal, although rumors of an agreement with the SEC and Spitzer continue to swirl. Unfortunately, the scandal and the uncertainty surrounding the company's future are keeping expectations low for next week's earnings announcement.

"There's been so much disruption in the company that mutual fund investors -- retail and institutional -- are just pulling out," says Matt Snowling, analyst at Friedman Billings Ramsey.

The consensus estimate for Janus' first quarter is 18 cents, a penny better than last year's earnings. Analyst estimates range from 8% to 12% year-over-year earnings growth, well below the gaudy 80% figure forecasted by T. Rowe Price's CEO.

Analysts' consensus forecast for Janus' first-quarter earnings is net income of $42 million on $272 million in revenue. Last year, the company reported $38 million in net income on revenue of $235 million.

Janus has already reported its AUM at the end of the first quarter at $145 billion, only 10% higher than March 2003's AUM of $132.7 billion, and well below the industry average increase of 33%.

The difference? Redemptions due to the mutual fund scandal.

J.P. Morgan analyst William Tanona says Janus saw total AUM fall $2.5 billon from February to March with redemptions of $3.1 billion partially offset by $600 million of market appreciation. For the entire first quarter of 2004, Janus lost a total of $10.5 billion of assets to redemptions, or 7% of its 2003 year-end AUM.

Investors are not the only ones taking their money and leaving Janus behind. The company will take a $17 million, or 4-cent-per-share, charge to cover the cost of departing CEO Mark Whitson, who stepped down from his position over the scandal. Steve Scheid, chairman of the board, has assumed Whitson's position.

Snowling says the Whitson charge will be lumped into a "messy" quarter complete with numerous charges related to compensation and intangibles arising from the scandal. Snowling's estimate of 16 cents is at the low end of the consensus estimate of 18 cents.

Most analysts are cautious on the stock, at least until a settlement is announced and the uncertainty is removed. Only KBW's Lee seems ready to step up to the plate and recommend the company's shares -- but not to everybody. "Its not a stock for everybody, but for where it's trading, there is long-term value due to its large cash flow," says Lee.