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Why Is State Street (STT) Up 3.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for State Street Corporation (STT - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is State Street due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

State Street Q3 Earnings Beat as AUM Touches Record Levels

State Street’s third-quarter 2026 earnings of $3.69 per share surpassed the Zacks Consensus Estimate of $3.65. The bottom line increased 33% from the prior-year quarter.

Results benefited from growth in NII and fee revenues, along with a reversal of provisions for credit losses. AUC/A and AUM reached record levels, which was a major positive. Higher operating expenses were a headwind.

Net income available to common shareholders (GAAP basis) was $1.03 billion, up 28.4% from the year-ago quarter.

Revenues Improve, Expenses Rise

Total revenues were $4 billion, which increased 12.9% year over year. However, the top line missed the Zacks Consensus Estimate of $4.04 billion.

NII was $864 million, up 20.8% year over year. NIM expanded 16 bps year over year to 1.12%.

Total fee revenues increased 11% year over year to $3.14 billion. The rise was driven by an increase in all fee income components, except for other fee revenues.

Non-interest expenses were $2.62 billion, up 7.6% from the prior-year quarter. The rise was due to an increase in all cost components, except for occupancy costs.

The company recorded a negative provision for credit losses of $4 million in the quarter against provisions of $9 million in the prior-year quarter.

The CET1 ratio was 11% as of Sept. 30, 2026, compared with 11.3% in the corresponding period of 2025. The return on average common equity was 16.4% compared with 13.4% in the year-ago quarter.

AUC/A and AUM Increase to Record Levels

As of Sept. 30, 2026, the total AUC/A was a record $59.17 trillion, up 14.5% year over year. The rise was driven by higher quarter-end equity market levels, client flows and net new business.

AUM was a record $6.31 trillion, up 15.8% year over year, led by higher quarter-end market levels and net inflows.

Share Repurchase Update

In the reported quarter, State Street repurchased shares worth $400 million.

2026 Outlook

The company expects fee revenues to increase 13-14%, driven by servicing activity and market-related revenues.

NII is now expected to reach the upper end of the 15-16% range, up from the prior target of growth at the upper end of the 14-15% range. This primarily reflects favorable NIM trends. For the fourth quarter, NII is projected to increase sequentially.

Management now expects expenses to rise 8-8.5%, up from the previous target of slightly more than 8%. This reflects higher revenue-related costs and continued strategic investments.

Management expects more than 500 basis points of positive operating leverage. 

The effective tax rate is expected to be almost 22%.

Medium-Term Financial Targets

Management defines the medium term as a three- to five-year period and expects to achieve its targets toward the earlier end of this range, supported by average annual positive operating leverage of 100-150 bps.

Over this period, State Street targets a pre-tax margin of 35% and ROTCE in the mid-20% range. The company expects sustained organic fee revenue growth across Investment Services, Investment Management and Markets, while NII is projected to increase at a low- to mid-single-digit rate. This outlook assumes low-single-digit balance-sheet growth and NIM toward the upper end of the 1.10-1.15% range. 

Management aims to generate positive operating leverage in each year of the medium-term period. However, the pace of improvement may vary depending on business execution and macroeconomic conditions. 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates review.

VGM Scores

Currently, State Street has a poor Growth Score of F, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a score of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, State Street has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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