On Wednesday, BofA Securities reaffirmed its Underperform rating on State Street Corporation, with a consistent price target of $99.00. This viewpoint is based on more appealing risk/reward opportunities elsewhere within BofA’s coverage, not due to specific risks related to State Street itself.
State Street’s management is recognized for its disciplined capital return, expense management, and growth initiatives. However, BofA Securities does not anticipate any immediate factors that could significantly boost the performance of State Street’s stock, especially when compared to other stocks that have distinct drivers for earnings per share growth or stock performance.
BofA Securities’ analysis highlights comparisons within the banking sector, indicating that certain stocks in their regional bank portfolio might have a better chance for re-rating. This is particularly true if the economy experiences a ‘soft landing’ and if the regulatory environment becomes more favorable.
For investors interested in trust banks, BofA Securities suggests considering Buy-rated BNY Mellon, which they believe offers a more attractive risk/reward balance as it undergoes a strategic transformation.
In conclusion, BofA Securities maintains its Underperform rating for State Street, stating that although the company is well-run, there are more promising investment options available in terms of potential returns.
In other developments, State Street Corporation exceeded earnings expectations for the third quarter of 2024, prompting Deutsche Bank, Goldman Sachs, Evercore ISI, Barclays, and Wells Fargo to increase their price targets for the company. This optimistic view was fueled by strong performances across various business divisions, a projected increase in share repurchases for the fourth quarter of 2024, and solid net interest income.
State Street reported a record earnings per share of $2.26, a considerable rise from the previous year’s $1.25. The company also experienced a 7% growth in fee revenues and a 9% rise in total revenues, along with securing $466 billion in assets under custody/administration and achieving record quarterly net flows of $100 billion in its Global Advisors division.
The company aims for fee revenue growth at or slightly above 4% to 5%, and has revised its net interest income growth target to 4% to 5%. It plans to generate $1 billion in software revenue over the next five years and is on track to acquire 6 to 8 new Alpha clients this year. Recent developments also include a partnership with Apollo Global Management for private market opportunities and the launch of 20 new ETFs.
InvestingPro Insights reveals additional perspectives on State Street Corporation. The company has a market capitalization of $27.42 billion and trades at a P/E ratio of 15.35, according to InvestingPro data as of Q2 2024. This valuation supports BofA’s view that the stock lacks immediate catalysts for significant outperformance.
Nevertheless, State Street exhibits positive financial indicators, having maintained dividend payments for 54 consecutive years and increased its dividend for 13 consecutive years, demonstrating a strong commitment to shareholder returns. This aligns with BofA’s recognition of management’s disciplined approach to capital return.
The stock has shown strong recent performance, with a 28.03% total return over the past six months and a 45.08% return over the past year. The stock price is now 97.06% of its 52-week high, indicating investor confidence despite BofA’s cautious stance.
InvestingPro Tips highlight that management has been aggressively repurchasing shares, which could support earnings per share growth. However, it is noted that the company is rapidly depleting cash, warranting close monitoring by investors.
For deeper analysis, InvestingPro provides additional insights into State Street Corporation, offering a comprehensive view of the company’s prospects and challenges.
This article was generated with AI assistance and reviewed by an editor.