Home Most Popular Investing State Street’s Q3 Earnings Outlook: Lower NIR and Fee Income

State Street’s Q3 Earnings Outlook: Lower NIR and Fee Income

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State Street’s Q3 Earnings Outlook: Lower NIR and Fee Income

State Street (STT) is set to announce its third-quarter 2023 results on October 18, and analysts expect a decline in both revenues and earnings compared to the previous year.

In the previous quarter, STT surpassed the Zacks Consensus Estimate for earnings, mainly driven by an increase in net interest revenues (NIR) and fee revenues. Despite this, higher expenses had a negative impact on the results.

Looking at the company’s earnings surprise history, State Street has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average earnings surprise of 0.84%.

The Zacks Consensus Estimate for State Street’s third-quarter earnings is $1.77 per share, indicating a 2.8% decline from the year-ago quarter. The consensus estimate for sales suggests a 1.5% year-over-year decline.

Key Factors and Estimates for Q3

Net Interest Revenues

One crucial factor for State Street’s earnings is its net interest revenues. Lending activities slowed down in the second quarter, and while interest rates remained high, an increase in funding costs negatively impacted NIR. As a result, NIR is expected to have been adversely impacted in the third quarter.

Fee Revenues

Lower volatility in foreign exchange (FX) markets is likely to have aided State Street’s FX trading services income. However, the company expects fee revenues to decline on a sequential basis. The consensus estimate for management fees suggests a 1.6% growth, while the estimate for servicing fees indicates a 1% decrease. Securities finance revenues and software and processing fees are also expected to show declines.

Expenses

State Street expects operating expenses to increase due to higher information systems and communication expenses, inflationary pressure, and the company’s investments in franchises. However, business restructuring activities are expected to offer some support.

What the Zacks Model Reveals

According to our proven model, State Street has a high chance of beating earnings expectations this time. With a positive Earnings ESP of +0.31% and a Zacks Rank #3 (Hold), the company has the right combination to increase the odds of an earnings beat.

Other Banks Worth a Look

If you’re interested in other bank stocks, Commerce Bancshares (CBSH) and Bank OZK (OZK) are also expected to post strong earnings. Both companies have favorable combinations of factors that could lead to an earnings beat this quarter.

As investors eagerly await State Street’s third-quarter earnings, it’s important to stay informed and make educated investment decisions. Keep an eye on companies in the infrastructure sector as well, as large-scale infrastructure projects are likely to drive significant growth and create opportunities for smart investors.

Remember, the views and opinions expressed in this article are solely those of the author and may not necessarily reflect the views of Nasdaq, Inc.