Finance sector has been one of the best performers in second-quarter earnings. So, today we bring State Street Corporation STT from the sector for you to consider. The company reflects strong fundamentals and solid growth prospects.
Easing margin pressure, enhanced capital deployment and continued synergies from the acquisition of GE Asset Management make this Zacks Rank #2 (Buy) stock an attractive pick.
Analysts seem to be optimistic about the company’s prospects as the stock is witnessing solid upward estimate revisions. Over the past 30 days, the Zacks Consensus Estimate for 2017 has risen 3.6% to $6.08 while that for 2018 it increased 3% to $6.83.
Also, its shares have rallied 18.8% so far this year, significantly outperforming the industry’s gain of 3.5%.
Further, State Street has a number of other aspects that make it an attractive investment option.
Revenue Strength: State Street has been witnessing consistent improvement in revenues. Over the past five years (2012-2016), total revenue recorded a compound annual growth rate of nearly 2%. Continuous investment in new products, new business wins and the GE Asset Management acquisition will likely strengthen the company’s revenue generation in the quarters ahead.
Additionally, the company’s projected sales growth of 12.2% in 2017 (compared with industry average of 6.3%) ensures continuation of the upward revenue trend.
Earnings per Share Growth: State Street has recorded an earnings growth rate of 19.9% over the last three to five years. Further, this earnings momentum is likely to continue in the near term as reflected by the company’s projected earnings per share (EPS) growth of 16% for 2017 and 11.7% for 2018.
Also, its long-term (three to five years) estimated EPS growth rate of 9.9% promises rewards for investors in the long run.
Impressive Capital Deployment: State Street’s capital deployment plan is commendable. The company’s 2017 capital plan (approved by the Federal Reserve) includes an 11% dividend hike and $1.4 billion share repurchase authorization. Given its solid liquidity position and earnings strength, the company should be able to sustain improved capital deployments and continue enhancing shareholders’ value.
Strong Leverage: State Street’s debt/equity ratio is 0.62 compared with the industry average of 0.88, indicating relatively lower debt burden. It reflects the financial stability of the company even in adverse economic conditions.
Superior Return on Equity (ROE): State Street’s ROE of 11.28% compared with the industry average of 8.92%, mirrors the company’s commendable position over its peers.
Stock Looks Undervalued: State Street stock looks undervalued with respect to its PEG ratio. The company’s PEG ratio of 1.53 is below the industry average of 1.61.
Favorable VGM Score: State Street has a VGM Score of B. Our research shows stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Other Stocks to Consider
The Zacks Consensus Estimate for BancFirst Corporation has jumped 3.7% over the past 30 days, for 2017. Further, the company’s share price has increased nearly 1% over the past six months. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
People's Utah Bancorp also boasts a Zacks Rank #1. Its earnings estimates for 2017 have risen 2.9%, over the past 30 days. Over the past six months, its shares have gained 1.1%.
East West Bancorp currently carries a Zacks Rank #2. The company’s earnings estimates remained stable over the past 30 days. Over the past six months, its shares have gained nearly 1%.
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State Street Corporation (STT): Free Stock Analysis Report
BancFirst Corporation (BANF): Free Stock Analysis Report
East West Bancorp, Inc. (EWBC): Free Stock Analysis Report
People's Utah Bancorp (PUB): Free Stock Analysis Report
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