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Fee Income to Aid State Street (STT) Q1 Earnings, NIR to Hurt
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State Street (STT - Free Report) is slated to report first-quarter 2024 results on Apr 12 before the opening bell. The company’s quarterly revenues are expected to have decreased on a year-over-year basis, while earnings are likely to have been stable.
In the last reported quarter, STT’s earnings beat the Zacks Consensus Estimate. Results were largely driven by stable fee revenues. However, higher expenses, a decline in net interest revenues (NIR) and a rise in provisions hurt results to some extent.
State Street has a decent earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a surprise of 4.98%, on average.
The Zacks Consensus Estimate for State Street’s first-quarter earnings is pegged at $1.52 per share, which has been revised marginally lower over the past seven days. The figure is in line with the year-ago quarter. Our estimate for earnings stands at $1.42, implying a 6.3% decline.
The consensus estimate of $3.06 billion for sales suggests a 1.4% year-over-year decline. Our estimate for sales is $3 billion.
Key Factors & Estimates for Q1
Net Interest Revenues: The Zacks Consensus Estimate for average interest-earning assets for the to-be-reported quarter is pegged at $233 billion, which implies a marginal rise from the previous quarter. Our estimate for the metric is pegged at $236.3 billion.
Lending activities continued at a decent pace in the first quarter, and the Federal Reserve kept the rates unchanged at a 22-year high of 5.25-5.5%. These factors are expected to have supported State Street’s NIR to some extent. However, an increase in funding costs weighed on NIR as interest rates remained high. Thus, NIR is likely to have been adversely impacted.
The Zacks Consensus Estimate for NIR (on a fully taxable-equivalent or FTE basis) of $667.6 million indicates a sequential fall of 1.7%. We project NIR on FTE basis of $660.2 million.
Management projects NIR to be flat or down 3% sequentially, given the current deposit mix expectations.
Fee Revenues: Lower volatility and volume in foreign exchange (FX) markets are likely to have aided State Street’s FX trading services income. The consensus estimate is pegged at $308.6 million, which is relatively stable with the last quarter. Also, management anticipates FX markets revenue growth to be muted from the last-year quarter level. Our estimate for the metric is pegged at $323.8 million.
The consensus estimate for management fees of $498.7 million implies a 4.1% increase on a sequential basis. The company expects the metric to rise 7-8% on a year-over-year basis. Our estimates for the same is pegged at $489.1 billion.
The Zacks Consensus Estimate for servicing fees of $1.24 billion indicates 2.4% growth. The company anticipates the same to inch up 1% from last year's quarter level. We project the metric to be $1.23 billion.
The consensus estimate for securities finance revenues of $107.7 million suggests an 11.1% jump from the last quarter. Our estimates for the same is pegged at $106.9 million.
However, the Zacks Consensus Estimate for software and processing fees suggests a 14.2% fall to $203.4 million. Driven by the timing of on-premise renewals and expected new SaaS installations, STT expects software and processing fees to likely go up more than 20% from the prior-year quarter. Our estimates for the same is pegged at $198.7 billion.
Overall, the Zacks Consensus Estimate for total fee revenues of $2.45 billion indicates a 3.4% improvement from the prior quarter. We project the metric to be $2.38 billion.
Management expects fee revenues to be up 2% year over year.
Expenses: Higher information systems and communication expenses, inflationary pressure and the company’s strategic buyouts and investments in franchises are expected to have led to a rise in operating expenses in the first quarter.
Management expects adjusted expenses to be up 1-1.5% on a year-over-year basis on the back of seasonality.
We anticipate total adjusted non-interest expenses to increase 9% from the last quarter to $2.4 billion.
What the Zacks Model Reveals
We cannot conclusively predict whether State Street will be able to beat the Zacks Consensus Estimate this time. This is because the company doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for State Street is -1.93%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Banks Worth a Look
Here are a couple of major bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for PNC Financial Services (PNC - Free Report) is +2.05% and it carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2024 results on Apr 16.
Over the past seven days, the Zacks Consensus Estimate for PNC’s quarterly earnings has moved almost 1% north to $3.09.
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Fee Income to Aid State Street (STT) Q1 Earnings, NIR to Hurt
State Street (STT - Free Report) is slated to report first-quarter 2024 results on Apr 12 before the opening bell. The company’s quarterly revenues are expected to have decreased on a year-over-year basis, while earnings are likely to have been stable.
In the last reported quarter, STT’s earnings beat the Zacks Consensus Estimate. Results were largely driven by stable fee revenues. However, higher expenses, a decline in net interest revenues (NIR) and a rise in provisions hurt results to some extent.
State Street has a decent earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, delivering a surprise of 4.98%, on average.
State Street Corporation Price and EPS Surprise
State Street Corporation price-eps-surprise | State Street Corporation Quote
The Zacks Consensus Estimate for State Street’s first-quarter earnings is pegged at $1.52 per share, which has been revised marginally lower over the past seven days. The figure is in line with the year-ago quarter. Our estimate for earnings stands at $1.42, implying a 6.3% decline.
The consensus estimate of $3.06 billion for sales suggests a 1.4% year-over-year decline. Our estimate for sales is $3 billion.
Key Factors & Estimates for Q1
Net Interest Revenues: The Zacks Consensus Estimate for average interest-earning assets for the to-be-reported quarter is pegged at $233 billion, which implies a marginal rise from the previous quarter. Our estimate for the metric is pegged at $236.3 billion.
Lending activities continued at a decent pace in the first quarter, and the Federal Reserve kept the rates unchanged at a 22-year high of 5.25-5.5%. These factors are expected to have supported State Street’s NIR to some extent. However, an increase in funding costs weighed on NIR as interest rates remained high. Thus, NIR is likely to have been adversely impacted.
The Zacks Consensus Estimate for NIR (on a fully taxable-equivalent or FTE basis) of $667.6 million indicates a sequential fall of 1.7%. We project NIR on FTE basis of $660.2 million.
Management projects NIR to be flat or down 3% sequentially, given the current deposit mix expectations.
Fee Revenues: Lower volatility and volume in foreign exchange (FX) markets are likely to have aided State Street’s FX trading services income. The consensus estimate is pegged at $308.6 million, which is relatively stable with the last quarter. Also, management anticipates FX markets revenue growth to be muted from the last-year quarter level. Our estimate for the metric is pegged at $323.8 million.
The consensus estimate for management fees of $498.7 million implies a 4.1% increase on a sequential basis. The company expects the metric to rise 7-8% on a year-over-year basis. Our estimates for the same is pegged at $489.1 billion.
The Zacks Consensus Estimate for servicing fees of $1.24 billion indicates 2.4% growth. The company anticipates the same to inch up 1% from last year's quarter level. We project the metric to be $1.23 billion.
The consensus estimate for securities finance revenues of $107.7 million suggests an 11.1% jump from the last quarter. Our estimates for the same is pegged at $106.9 million.
However, the Zacks Consensus Estimate for software and processing fees suggests a 14.2% fall to $203.4 million. Driven by the timing of on-premise renewals and expected new SaaS installations, STT expects software and processing fees to likely go up more than 20% from the prior-year quarter. Our estimates for the same is pegged at $198.7 billion.
Overall, the Zacks Consensus Estimate for total fee revenues of $2.45 billion indicates a 3.4% improvement from the prior quarter. We project the metric to be $2.38 billion.
Management expects fee revenues to be up 2% year over year.
Expenses: Higher information systems and communication expenses, inflationary pressure and the company’s strategic buyouts and investments in franchises are expected to have led to a rise in operating expenses in the first quarter.
Management expects adjusted expenses to be up 1-1.5% on a year-over-year basis on the back of seasonality.
We anticipate total adjusted non-interest expenses to increase 9% from the last quarter to $2.4 billion.
What the Zacks Model Reveals
We cannot conclusively predict whether State Street will be able to beat the Zacks Consensus Estimate this time. This is because the company doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for State Street is -1.93%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Banks Worth a Look
Here are a couple of major bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for PNC Financial Services (PNC - Free Report) is +2.05% and it carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2024 results on Apr 16.
Over the past seven days, the Zacks Consensus Estimate for PNC’s quarterly earnings has moved almost 1% north to $3.09.
Truist Financial (TFC - Free Report) is scheduled to release first-quarter 2024 earnings on Apr 22. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.83%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TFC’s quarterly earnings estimates have remained unchanged at 78 cents over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.