Wolfe Research lifts State Street stock rating to Peerperform

On Monday, Wolfe Research adjusted its stance on State Street Corporation (NYSE:STT), elevating the company's stock rating from Underperform to Peerperform. Trading at $99.06 and approaching its 52-week high of $101.91, State Street has demonstrated remarkable momentum with a 36.55% return over the past year. The revision follows a period of underperformance by State Street in comparison to its peers within the Universal and Trust Banks sector amid the Federal Reserve's tightening cycle. State Street's shares had been impacted by several factors, including higher deposit costs, decelerating fee income, and persistent overhead expenses.

According to Wolfe Research, State Street has recently demonstrated improved dynamics in its Lines of Business (LOBs), which include Servicing and Investment Management. The analyst highlighted the company's increased Net Interest Income (NII) and deposit resilience, enhanced fee income driven by the performance of Charles River and STT Alpha, and a pledge to achieve positive fee operating leverage. InvestingPro data reveals that State Street has maintained dividend payments for 55 consecutive years, with a current yield of 3.07%.

These improvements have resulted in State Street's Earnings Per Share (EPS) growth algorithm outpacing that of Northern Trust (NASDAQ:NTRS) and closing in on the Bank of New York Mellon Corporation (NYSE:BK). Wolfe Research's analysis of benchmarking trends from 2024, compared to 2023, further supports the view of State Street's stronger positioning. The updated EPS growth algorithm also indicates that State Street is projected to match the Compound Annual Growth Rate (CAGR) of its peers by 2026, aligning with BK and other bank counterparts.

State Street Corporation's focus on delivering positive fee operating leverage is a significant factor contributing to the analyst's revised outlook. With revenue growth of 8.62% in the last twelve months and five analysts revising their earnings estimates upward, this $28.61B market cap institution appears well-positioned for growth. This strategic direction is expected to foster a more robust EPS growth trajectory for the company going forward. The upgrade by Wolfe Research suggests a shift in investor sentiment regarding State Street's potential for financial performance and growth amidst the broader banking sector's challenges and opportunities. According to InvestingPro, the stock is currently trading near its Fair Value, and subscribers can access additional insights through the comprehensive Pro Research Report, along with 12 more exclusive ProTips for STT.

In other recent news, State Street Corporation surpassed analyst expectations in its fourth quarter, with adjusted earnings per share reaching $2.60 and revenue at $3.41 billion, a 12% year-over-year increase. The company's total fee revenue rose by 13% to $2.66 billion, while net interest income increased by 10% to $749 million compared to the same quarter last year. State Street's assets under custody and administration reached $46.7 trillion, marking an 11% increase from the previous year.

Analysts from Goldman Sachs, Truist Securities, and CFRA have made recent adjustments to their outlooks for State Street. Goldman Sachs cut the stock target to $105 but maintained an optimistic view on the company's financial performance. Truist Securities reduced the price target to $104, while CFRA lifted the stock rating but cut the price target to $113.

Despite these adjustments, Goldman Sachs' revised earnings per share estimates for State Street remain largely unchanged for the years 2025, 2026, and 2027, at $9.67, $11.04, and $12.80, respectively. These figures align with the company's guidance for 2025 and the latest forward curve.

In 2024, State Street returned $2.2 billion to shareholders, including $1.3 billion in buybacks and $900 million in dividends, offering a 3% dividend yield. The company has maintained dividend payments for 55 consecutive years. These are the recent developments for State Street Corporation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.