State Street (STT) delivered better-than-expected Q3 results characterized by strong performances across its core businesses. The company also made measurable progress towards its medium-term financial targets. Robust growth saw the results top analyst estimates on revenue and earnings. STT shares rose 2.22% to close at $94.79 on October 18.
State Street, through its subsidiaries, offers a range of financial products and services to institutional investors. Some of the products and services it provides include cash management, foreign exchange, brokerage, and product accounting.
The company delivered a 7% year-over-year increase in revenue in Q3, which landed at $2.99 billion, exceeding consensus estimates of $2.96 billion. The increase can be attributed to a 9% increase in fee revenue, confirming growth in all businesses. Diluted earnings per share were up 35% year-over-year to $1.96, exceeding consensus estimates of $1.92. (See Top Smart Score Stocks on TipRanks)
During the quarter State Street confirmed its plans to acquire BBH Investor Services. The acquisition is expected to strengthen the company’s competitive positioning and enhance its prospects on asset servicing. Additionally, it should also expand its footprint on the international scene, consequently enhancing its ability to generate more shareholder value.
In addition, State Street suspended its share repurchase program and raised $1.9 billion to be used to finance the BBH Investor Services acquisition. It also returned $179 million to shareholders in the form of common stock dividends. Additionally, the company announced a 10% increase in its dividend, payable in Q4.
Recently, Deutsche Bank analyst Brian Bedell reiterated the Buy rating on the stock and raised the price target to $119 from $111, implying 25.54% upside potential to current levels.
Consensus among analysts is a Moderate Buy based on 5 Buys, and 4 Holds. The average State Street price target of $102.71 implies 8.36% upside potential to current levels.
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