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Inside State Street's 4Q17 Results: Misses and More

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Inside State Street's 4Q17 Results: Misses and More PART 1 OF 8

Where State Street Stood with the 4Q17 Estimates

Misses EPS estimates

State Street (STT) just reported EPS (earnings per share) of $1.61 for 4Q17—a figure that missed the Wall Street analysts’ estimate by $0.10. But State Street’s management reflected a positive view of its 2017 results due to the positive momentum it has seen in the asset management and asset servicing businesses.

This momentum was also visible in the company’s AUM (assets under management) and AUCA (assets under custody and administration). Notably, State Street achieved its 2017 financial objectives.

Where State Street Stood with the 4Q17 Estimates

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In 4Q17, State Street saw a rise of 15% YoY (year-over-year) in its AUCA, thanks to positive flows and favorable momentum in equity markets. New businesses also contributed to this rise.

Missed revenue estimates

State Street missed the 4Q17 revenue estimates of Wall Street analysts by $130 million, generating only ~$2.9 billion in revenues for the quarter. Still, State Street Global Advisors oversees the company’s asset management business, and at the end of 2017, SSGA’s AUM stood at $2.8 trillion, which implies a 13% YoY rise.

This rise in SSGA’s AUM was helped by ETF (exchange-traded fund) inflows. GE Asset Management and positive equity markets also contributed to the rise. That said, State Street saw a substantial 38% fall in net income in 4Q17, from $593 million in 4Q16 to $370 million.

Notably, State Street’s beta value stood at 1.39 at the end of 4Q17. By comparison, peers (XLF) Invesco (IVZ), SEI Investments (SEIC), and PNC Financial Services (PNC) have beta values of 1.93, 1.44, and 1.01, respectively.

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