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Trefis Has A Price Estimate Of $66 For State Street's Stock
Trefis price estimate for State Street
State Street provides Investment Servicing (e.g. asset servicing, foreign exchange & other trading, fund services, liquidity services, securities lending) and Investment Management services to its clients.
Its end users include Mutual funds, Retirement plans, Insurance companies, Mutual fund investors, Institutional investors, Private investors , and High net-worth individuals.
It faces stiff challenges and competition from offerings by its competitors such as JPMorgan, BNY Mellon, BlackRock, Vanguard, and Citigroup.
We arrive at the stock price estimate for State Street as:
Stock Price = (Total Revenue x Net Income Margin / Shares Outstanding) x P/E Multiple
Trefis price estimate
Adj. Net Income Margin
State Street Earnings: Performance and 2019 ForecastState Street Revenues: How Does State Street Make Money?State Street Stock (NYSE:STT)All Trefis Financial Industry Data
#1. Estimating State Street's Total Revenues:
#1.1 Estimating State Street's Revenue from Investment Services for 2019
Asset Servicing revenues would drop by 5% y-o-y in 2019 driven by slight decrease in AuC/A and lower Investments Servicing & Administration Fee as % Assets under Custody.
As a result, Investment Servicing revenues are expected to be around $9.8 billion in 2019, which is 3% less than the previous year.
Investment Services [A=B+C+D]
Asset Servicing [B]
Forex & Other Trading [C]
Securities Finance & Other [D]
#1.2 Estimating State Street's Total Revenues for 2019
State Street is expected to report $11.6 billion in Revenues for 2019, which is 3% less than the previous year
This would be caused by 3% y-o-y decrease in Investment services revenues coupled with a 5% drop in Investment Management segment.
Our Interactive Dashboard Analysis, How Does State Street Make Money?, Provides An In Depth View Of The Company's Revenues.
Total Revenues [A=B+C]
Investment Management [B]
Investment Services [C]
Note: State Street changed its reporting structure in Q1 2019. We will update our model to reflect the new reporting structure once sufficient historical data is available.
#2. Estimating State Street's Adjusted Net Income for 2019:
State Street is expected to report a Net Income of $2 billion in 2019 which is 15% lower than the figure for the previous year
This would be driven by higher expected Tax rate and lower operating margin (down 133 bps) as compared to 2018.Net Income Margin would see a decrease from 20.1% in 2018 to 17.6% in 2019, mainly driven by 3% drop in total revenues.
Adjusted Net Income [=A*B]
Total Revenues [A]
Net Income Margin [B]
Notably, Adjusted Net Income increased 30% from $1.8 billion in 2015 to $2.4 billion in 2018.
#3. Determining State Street's EPS for 2019:
The EPS figure has increased 43% over the last 4 years from $4.47 in 2015 to $6.40 in 2018. However, we expect State Street to report an EPS of $5.83 in 2019.
EPS drop from 2018 can be attributed to lower Adjusted Net Income, partially offset by drop in Outstanding Shares.
EPS [A= B/C]
Adj. Net Income [B]
Average diluted common shares issued and outstanding [C]
State Street has regularly invested in share repurchases to boost shareholder returns and is expected to buyback $1.6 billion worth of shares in 2019.
#4. Estimating State Street's Share Price:
Our Price Estimate of $66 For State Street's Stock is based on our Detailed Valuation Model, and implies a 11.4x P/E Multiple on expected 2019 EPS of $5.83
State Street's Share Price [A=B*C]
Comparing State Street's Historical P/E Multiple With That of Its Peers
P/E Multiples are based on Share Price at the end of Q3, and reported (or expected) Adjusted Earnings for the full year.
State Street's Implied P/E multiple of 11.4x in 2019 is lowest among its peers
DISAGREE WITH OUR FORECASTS? CREATE YOUR OWN
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
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can see how well you forecast the company's performance at the end of each period and compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs