On Tuesday, CFRA revised its stance on State Street Corporation (NYSE:STT), elevating the financial services firm's stock from a Sell to a Hold rating. Accompanying this adjustment, the firm also increased State Street's price target from $70.00 to $90.00. The upgrade was attributed to an anticipated improvement in the company's fundamental outlook, particularly concerning fee revenue and net interest income (NII).
State Street's forecasted revenues are projected to reach $12.5 billion in 2024 and $12.9 billion the following year. CFRA has also raised its earnings per share (EPS) estimates for the company, now expecting $8.10 in 2024, up from the previous $7.75, and $8.70 in 2025, an increase from the earlier $8.45 forecast. This optimistic revision is partly due to State Street's guidance indicating an expected growth in NII, contrasting with previous predictions of a decline.
In the second quarter of 2024, State Street reported an EPS of $2.15, surpassing estimates by $0.13. The company's assets under custody and administration (AUC/A) showed a year-over-year increase of 0.9%, reaching $44.3 trillion, while assets under management (AUM) grew by 1.8% to $4.4 trillion.
The report detailed a varied performance across different revenue streams, with a 2% year-over-year increase in total non-NII fee revenue. This included a 2% decrease in servicing fees, an 11% rise in both management fees and forex trading services, an 8% drop in securities finance, and a 3% decline in software and processing fees.
State Street also reported a 7.6% year-over-year rise in total deposits, driven significantly by a 14.9% surge in interest-bearing deposits and a 1.9% increase in loans. During the second quarter, the company returned $407 million to its shareholders, which comprised $200 million in stock buybacks and $207 million in dividends. This financial activity underscores State Street's commitment to delivering shareholder value amidst its operational growth.
In other recent news, State Street Corporation has been appointed to service Galapagos (NASDAQ:GLPG) Capital's hedge funds, handling fund accounting, administration, and investor services.
This partnership aligns with Galapagos Capital's strategic objectives and is anticipated to enhance the hedge fund manager's operational efficiency. The financial services giant also reported mixed first quarter results, showing growth in fee revenue and total revenue despite challenges in servicing fees.
State Street's stock was downgraded to Underperform by Wolfe Research due to concerns about the company's earnings per share (EPS) growth through 2026. The firm's projections, which predict a lower compound annual growth rate in EPS, significantly differ from the market consensus.
In the Federal Reserve's annual stress test, State Street demonstrated sufficient capital to withstand a severe economic downturn. The company's high-quality capital levels remained well above the required regulatory minimum even in a severe economic scenario.
An Oklahoma law aimed at preventing state pension systems from investing in companies reducing oil and gas industry investment affected State Street, but a recent temporary injunction against the law was issued by an Oklahoma judge.
State Street also settled a lawsuit with Kristen Visbal, the creator of the "Fearless Girl" statue, over the sale of statue replicas. These are just a few of the recent developments involving State Street Corporation.
InvestingPro Insights
As State Street Corporation (NYSE:STT) navigates through its financial journey, the latest data from InvestingPro provides a deeper insight into the company's market position and performance. With a solid market capitalization of $25.28 billion and a Price/Earnings (P/E) ratio of 15.32, which adjusts to a slightly more attractive 13.56 when looking at the last twelve months as of Q1 2024, investors may find confidence in the company's valuation metrics. Notably, State Street has demonstrated a strong commitment to shareholder returns, as evidenced by its 54-year track record of maintained dividend payments and a 13-year streak of raising dividends, a testament to its robust financial discipline and operational resilience.
The company's operating income margin stands at an impressive 22.2% for the last twelve months as of Q1 2024, further attesting to its efficiency. Additionally, State Street's dividend yield as of mid-2024 is an attractive 3.5%, paired with a dividend growth of 9.52% in the same period. Investors may also be intrigued by the company's recent stock performance, trading near its 52-week high and achieving a 1-month price total return of 12.37% as of mid-2024. These metrics not only underscore State Street's financial health but also its potential for continued growth.
For those seeking more comprehensive analysis and guidance, InvestingPro offers additional InvestingPro Tips for State Street Corporation, which can be found at https://www.investing.com/pro/STT. These tips include insights on the company's share buyback strategy and future profitability predictions. Moreover, investors can benefit from exclusive insights by using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a wealth of knowledge to inform investment decisions.
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