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On Wednesday, Barclays has increased the price target for State Street Corporation (NYSE: NYSE:STT) shares from the previous $103.00 to $108.00 while maintaining an Overweight rating on the stock. The adjustment follows the company's earnings report, which revealed earnings per share (EPS) surpassing consensus expectations. The firm's fee revenue and net interest income were the primary drivers behind the better-than-expected performance, although expenses were slightly higher than anticipated.
The bank's third-quarter performance was bolstered by higher share repurchase activity, with $450 million repurchased compared to $200 million in the second quarter of 2024. State Street also reported an increase in average deposits and record levels of assets under custody (AUC) and assets under management (AUM). Furthermore, the company continued to secure new business wins, contributing to its strong financial results.
State Street has updated its financial outlook, raising expectations for net interest income growth to the 4-5% range, up from the previous forecast of a slight increase. Fee income projections were also adjusted to at or slightly above the 4-5% range, while expense growth estimates were revised to 3.5%, up from 3.0%. The company continues to anticipate positive operating leverage in both fee income and total operations.
In addition to these forecasts, State Street is planning for increased share repurchase activity, which is expected to exceed the $450 million executed in the third quarter of 2024. This strategic financial management move is indicative of the company's robust financial health and commitment to delivering value to shareholders.
In other recent news, State Street Corporation reported a record third-quarter earnings per share (EPS) of $2.26, a significant increase from the previous year's $1.25. The company also experienced a 7% growth in fee revenues and 9% in total revenues while effectively managing expenses. Furthermore, the corporation achieved record quarterly net flows of $100 billion in its Global Advisors division and won $466 billion in assets under custody/administration.
Wells Fargo has maintained its Overweight rating on State Street and increased the price target to $106.00 from the previous $98.00, following the company's reported growth in core servicing and higher expenses. This adjustment led Wells Fargo to revise its earnings estimates upward, reflecting the quarter's outcomes and the new guidance. The new price target is based on these updated estimates, suggesting confidence in State Street's financial trajectory and its ability to sustain positive trends.
State Street's future outlook includes a projection of total fee revenue growth at or slightly above 4% to 5%, and an upward revision of net interest income growth to 4% to 5%. The company also aims to generate $1 billion in software revenue over the next five years and is on track to win 6 to 8 new Alpha clients this year.
Other recent developments include a partnership with Apollo Global Management (NYSE:APO) for private market opportunities and the launch of 20 new ETFs. However, potential headwinds due to a shift in asset mix towards cash and variability in lending activity have been noted.
InvestingPro Insights
State Street Corporation's recent performance and Barclays' increased price target are further supported by real-time data from InvestingPro. The company's market capitalization stands at $27.42 billion, with a P/E ratio of 15.35 for the last twelve months as of Q2 2024, indicating a potentially attractive valuation relative to earnings.
InvestingPro Tips highlight State Street's strong dividend history, having maintained dividend payments for 54 consecutive years and raised its dividend for 13 consecutive years. This aligns with the company's commitment to shareholder value, as evidenced by its increased share repurchase activity mentioned in the article.
The company's revenue for the last twelve months as of Q2 2024 was $12.01 billion, with an operating income margin of 22.06%. These figures support the article's mention of strong fee revenue and net interest income driving better-than-expected performance.
Investors seeking more comprehensive analysis can find 10 additional InvestingPro Tips for State Street Corporation, offering deeper insights into the company's financial health and market position.
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