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State Street is slated to release its Q4 and full-year 2019 results on January 17, 2020. For FY 2019, Trefis estimates that the company will report:Revenues would decrease to $11.61 billion primarily due to weaker interest rate forecasts coupled with asset management headwinds. Further, it is slightly lower than the consensus estimate of $11.64 billion.EPS figure would reduce to $5.83 primarily due to the expected drop in revenues and higher expenses, weighing on the net income margin. Further, the EPS figure would narrowly miss the consensus estimate of $5.89.
We believe that weaker-than-expected revenues and earnings for FY 2019 will likely result in negative movement in the State Street's' stock price once earnings are announced. In fact, our forecast indicates that State Street's Valuation is $66 a share, which is roughly 20% lower than the current price of around $82.
(1) Revenues expected to be slightly below consensus estimates
Trefis estimates State Street's 2019 revenues to be $11.61 billion, slightly below the consensus estimate of $11.64 billion
Trefis Estimate of Total Revenues
(1) Investment Services $9.75 Bil (84%)
(2) Investment Management $1.86 Bil (16%)
TOTAL $11.61 Bil
Consensus $11.64 Bil
Surprise -($0.03) Bil
(2) EPS likely to narrowly miss consensus estimates
State Street's 2019 earnings per share (EPS) expected to be $5.83 per Trefis analysis, 1% lower than the consensus estimate of $5.89 per share
EPS - 2019E
Total Revenues $11.6 Bil
- Total Expenses $9.6 Bil(*)
Net Income $2.0 Bil
÷ Shares Outstanding 349.7 Mil
(*) - The expense figure includes preferred dividend and other minority expenses
(3) Stock price estimate ~20% lower than market price
Trefis forecast for State Street's 2019 earnings as well as P/E multiple are lower than the market expectations, working out to a fair value of $66 for State Street's stock, which is roughly 20% lower than the current market price of around $82.
State Street's Share Price [= A x B]
EPS - 2019E [A]
Trailing P/E Multiple [B]
State Street Stock (NYSE:STT)State Street Revenues: How Does State Street Make Money?All Trefis Industrials Company data
Detail about our forecast for State Street's (1) Revenues, (2) EPS, and (3) P/E Multiple follow:
(1) Revenues would decrease 3.1% to $11.6 billion in 2019
Although revenues have grown 16% from $10.3 billion in 2016 to $12 billion in 2018, we expect it to drop 3.1% in 2019 due to weaker interest rate forecasts coupled with asset management headwinds. The investment servicing segment, which constitutes the majority of the bank’s revenues, is expected to decrease by 2.7% in 2019 due to a 5% decline in Asset Servicing revenues. Further, Investment Management revenues are expected to drop by 4.8% in 2019, as challenging economic conditions and intense competition in the investment management space would reduce the fees as % of AuM.
Total Revenues [=A+B]
Investment Services [A]
Investment Management [B]
Notably, we expect revenues to remain unchanged over the next two years due to challenging industry conditions, restricting State Street around the $11.6 billion mark by 2020.
Our interactive dashboard analysis, How Does State Street Make Money?, provides an in-depth view of the company's revenues along with our forecasts for 2020.
For 2020, we believe that a slight decrease in expenses coupled with almost the same revenues will result in the net income margin figure increasing to 17.9%Our interactive dashboard analysis, How Does State Street Spend Its Money, provides an in depth view of the company's expenses.
(3) A trailing P/E multiple of 11.4x looks appropriate for State Street's stock, as opposed to the current implied P/E multiple of 13.8x
We use our full cash flow model for State Street to arrive at a P/E multiple of 11.4x for a price estimate of $66
Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year
P/E Multiple STT
P/E Multiple BK
P/E Multiple BLK
P/E Multiple JPM
Our complete set of analyses on State Street
1. How to save your forecasts for State Street:
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
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