Why State Street (STT) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of State Street Corp.  (STT) are down -2.78% to $63.90 after the custody bank reported a 22% decline in first quarter profit, mostly the result of expenses related to job cuts.

Total expenses jumped nearly 11% to $2.03 billion. Employee compensation costs were up about 5% to approximately $1.09 billion.

The bank said that its results included pre-tax severance expenses of $72 million, or 11 cents per share.

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TheStreet Ratings team rates STATE STREET CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate STATE STREET CORP (STT) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, attractive valuation levels, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • STT's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 0.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • STATE STREET CORP has improved earnings per share by 22.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, STATE STREET CORP increased its bottom line by earning $4.61 versus $4.19 in the prior year. This year, the market expects an improvement in earnings ($4.97 versus $4.61).
  • The gross profit margin for STATE STREET CORP is currently very high, coming in at 95.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.57% is above that of the industry average.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: STT Ratings Report
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