As you might know, State Street Corporation (NYSE:STT) recently reported its yearly numbers. The result was positive overall - although revenues of US$12b were in line with what analysts predicted, State Street surprised by delivering a statutory profit of US$5.75 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following last week's earnings report, State Street's 13 analysts are forecasting 2020 revenues to be US$11.8b, approximately in line with the last 12 months. Statutory earnings per share are expected to step up 17% to US$6.78. Yet prior to the latest earnings, analysts had been forecasting revenues of US$11.9b and earnings per share (EPS) of US$6.58 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$87.33, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic State Street analyst has a price target of US$100.00 per share, while the most pessimistic values it at US$61.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
It can also be useful to step back and take a broader view of how analyst forecasts compare to State Street's performance in recent years. We would highlight that State Street's revenue growth is expected to slow, with forecast 0.4% increase next year well below the historical 3.6%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.1% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect State Street to grow slower than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards State Street following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that State Street's revenues are expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on State Street. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for State Street going out to 2022, and you can see them free on our platform here..
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