State Street Gains 13.3% YTD: Should You Buy the Stock Now?

Core Viewpoint - State Street Corporation (STT) has outperformed its industry and close peers in terms of stock performance, with a year-to-date increase of 13.3% compared to the industry's 6.3% and the S&P 500's 9.5% rise [1][8] Group 1: Growth Factors - State Street is expanding through strategic acquisitions and partnerships, including collaborations with smallcase and Ethic Inc., and acquiring global custody businesses from Mizuho Financial Group [4][5] - The company has restructured its European joint venture and consolidated its operations in India, which are expected to yield revenue and cost benefits [6][9] - The Zacks Consensus Estimate for State Street's 2025 revenues is $13.68 billion, indicating a year-over-year growth of 4.6% [9] Group 2: Financial Performance - Fee income has shown a four-year compound annual growth rate (CAGR) of 1.7% from 2020 to 2024, with continued growth in the first half of 2025 [10][12] - Assets under custody and administration (AUC/A) and assets under management (AUM) have experienced a four-year CAGR of 4.7% and 8%, respectively [11] - Net interest income (NII) has a CAGR of 7.4% over the past four years, although net interest margin (NIM) contracted to 1.10% in 2024 [13] Group 3: Analyst Sentiment and Valuation - Analysts have revised the earnings estimates for 2025 and 2026 upward by 1.1%, indicating optimism about STT's earnings growth potential [14] - State Street's current forward price/earnings (P/E) ratio is 10.66, lower than the industry average of 11.23, suggesting it is undervalued compared to peers like BankUnited and Fifth Third [17][19] - The company has increased its quarterly dividend by 11% to 84 cents per share and has a share repurchase authorization of up to $5 billion [19][20] Group 4: Investment Outlook - Given its strong fundamentals, robust earnings and sales growth projections, and lower valuation compared to the industry, State Street appears to be an attractive investment option [22]