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5 Reasons to Add State Street (STT) Stock to Your Portfolio
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It seems a wise idea to add State Street Corporation (STT - Free Report) stock to your portfolio now. The company’s solid business servicing wins, strategic acquisitions, global reach and efforts to technologically upgrade operations are expected to support revenue growth. Its steady capital deployment activities will likely continue to enhance shareholder value.
Further, analysts seem optimistic regarding the company’s earnings growth prospects. Over the past 30 days, the Zacks Consensus Estimate for STT’s 2023 earnings has been revised 1.8% upward. Thus, the stock currently carries a Zacks Rank #2 (Buy).
Over the past six months, shares of STT have gained 31%, outperforming the industry’s rally of 9.9%.
Image Source: Zacks Investment Research
Mentioned below are a few other factors that make State Street stock an impressive investment option now.
Revenue Strength: While the company’s net interest revenues (NIR) have declined over the past couple of years because of near-zero interest rates, the same witnessed a three-year (ended 2022) compound annual growth rate (CAGR) of 7.5%. In the current high interest rate regime, State Street is expected to continue witnessing an increase in NIR. For 2023, management expects NIR to increase 20%.
Likewise, while the company’s total fee revenues declined in 2022, the same saw a four-year (2019-2022) CAGR of 1.6%. The rise was mainly driven by an increase in client activity and significant market volatility. State Street is well-positioned with respect to fundamental business activities, given its global exposure, and a broad array of innovative products and services (including the launch of State Street Digital and State Street Alpha). These efforts, along with business servicing wins and inorganic growth strategy, are expected to keep supporting the top line.
The company’s projected sales growth rates of 3.9% for 2023 and 2.2% for 2024 ensure the continuation of the upward revenue trend.
Earnings Per Share (EPS) Growth: State Street recorded earnings growth of 1.8% over the last three to five years. The upward momentum is likely to continue in the near term, as reflected by the company’s projected EPS growth rates of 16.2% for 2023 and 9% for 2024.
Also, the company’s long-term (three to five years) estimated EPS growth rate of 8.9% promises rewards for investors.
Impressive Capital Deployments: State Street’s capital deployment plan is impressive. Following the clearance of the 2022 stress test, in July, the company announced a 10% increase in quarterly dividend to 63 cents per share. It announced a new share repurchase program in January 2023, under which, it is authorized to buy back shares worth up to $4.5 billion. Also, State Street plans to return more than 80% of its earnings in 2023. Driven by a strong capital position and earnings strength, the company is expected to sustain improved capital deployments in the future and enhance shareholder value.
Strong Leverage: State Street’s debt/equity ratio is 0.65 compared with the industry average of 0.90. This indicates that STT has a relatively lower debt burden compared with peers. Thus, the company will be more financially stable in adverse economic conditions.
Favorable Valuation: The State Street stock seems undervalued right now when compared with the broader industry. The company’s PEG ratio of 1.16 is lower than the industry average of 1.44. Also, its price-cash flow (P/CF) ratio is 8.12, which is below the industry average of 8.75.
Other Stocks Worth a Look
A couple of other top-ranked stocks from the finance space are The Bank of New York Mellon Corporation (BK - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) .
The Zacks Consensus Estimate for BK’s current-year earnings has increased 2.8% over the past 30 days. The company’s share price has increased 23.7% over the past six months. BK currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
IBKR also sports a Zacks Rank of 1 at present. The company’s 2023 earnings estimates have been unchanged over the past 30 days. Over the past six months, IBKR’s shares have rallied 39.3%.
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5 Reasons to Add State Street (STT) Stock to Your Portfolio
It seems a wise idea to add State Street Corporation (STT - Free Report) stock to your portfolio now. The company’s solid business servicing wins, strategic acquisitions, global reach and efforts to technologically upgrade operations are expected to support revenue growth. Its steady capital deployment activities will likely continue to enhance shareholder value.
Further, analysts seem optimistic regarding the company’s earnings growth prospects. Over the past 30 days, the Zacks Consensus Estimate for STT’s 2023 earnings has been revised 1.8% upward. Thus, the stock currently carries a Zacks Rank #2 (Buy).
Over the past six months, shares of STT have gained 31%, outperforming the industry’s rally of 9.9%.
Image Source: Zacks Investment Research
Mentioned below are a few other factors that make State Street stock an impressive investment option now.
Revenue Strength: While the company’s net interest revenues (NIR) have declined over the past couple of years because of near-zero interest rates, the same witnessed a three-year (ended 2022) compound annual growth rate (CAGR) of 7.5%. In the current high interest rate regime, State Street is expected to continue witnessing an increase in NIR. For 2023, management expects NIR to increase 20%.
Likewise, while the company’s total fee revenues declined in 2022, the same saw a four-year (2019-2022) CAGR of 1.6%. The rise was mainly driven by an increase in client activity and significant market volatility. State Street is well-positioned with respect to fundamental business activities, given its global exposure, and a broad array of innovative products and services (including the launch of State Street Digital and State Street Alpha). These efforts, along with business servicing wins and inorganic growth strategy, are expected to keep supporting the top line.
The company’s projected sales growth rates of 3.9% for 2023 and 2.2% for 2024 ensure the continuation of the upward revenue trend.
Earnings Per Share (EPS) Growth: State Street recorded earnings growth of 1.8% over the last three to five years. The upward momentum is likely to continue in the near term, as reflected by the company’s projected EPS growth rates of 16.2% for 2023 and 9% for 2024.
Also, the company’s long-term (three to five years) estimated EPS growth rate of 8.9% promises rewards for investors.
Impressive Capital Deployments: State Street’s capital deployment plan is impressive. Following the clearance of the 2022 stress test, in July, the company announced a 10% increase in quarterly dividend to 63 cents per share. It announced a new share repurchase program in January 2023, under which, it is authorized to buy back shares worth up to $4.5 billion. Also, State Street plans to return more than 80% of its earnings in 2023. Driven by a strong capital position and earnings strength, the company is expected to sustain improved capital deployments in the future and enhance shareholder value.
Strong Leverage: State Street’s debt/equity ratio is 0.65 compared with the industry average of 0.90. This indicates that STT has a relatively lower debt burden compared with peers. Thus, the company will be more financially stable in adverse economic conditions.
Favorable Valuation: The State Street stock seems undervalued right now when compared with the broader industry. The company’s PEG ratio of 1.16 is lower than the industry average of 1.44. Also, its price-cash flow (P/CF) ratio is 8.12, which is below the industry average of 8.75.
Other Stocks Worth a Look
A couple of other top-ranked stocks from the finance space are The Bank of New York Mellon Corporation (BK - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) .
The Zacks Consensus Estimate for BK’s current-year earnings has increased 2.8% over the past 30 days. The company’s share price has increased 23.7% over the past six months. BK currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
IBKR also sports a Zacks Rank of 1 at present. The company’s 2023 earnings estimates have been unchanged over the past 30 days. Over the past six months, IBKR’s shares have rallied 39.3%.