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State Street (STT) beat on earnings this morning — then gapped down about 7% anyway.
The custody bank reported Q3 diluted EPS of $3.69, up 32.7% from a year ago and ahead of the $3.65–$3.68 consensus range. But revenue of $4.004 billion came in about $37 million shy of estimates, and that miss — plus rising expenses — was all the market needed on a hot-CPI day.
- EPS: $3.69 vs ~$3.65–$3.68 consensus (+32.7% YoY)
- Revenue: $4.004B vs ~$4.03B estimate (+12.9% YoY, a miss)
- Fee revenue: $3.14B, +11% YoY; NII $864M, +21%
- Assets under custody/administration: $59.2T (+15% YoY); AUM $6.31T (+16%)
- Expenses: $2.62B, +8% YoY
The operating story underneath was actually strong. Servicing fees hit a record $1.492 billion (+9.9%), management fees jumped 20% to $797 million, and net interest margin expanded to 1.12% from 0.96% a year ago. Management raised its full-year outlook: fee revenue growth of 13–14% and NII growth of 15–16%.
It was also the 11th straight quarter of positive operating leverage — about 530 basis points this time. Pre-tax margin widened 350 bps to 34.6%, and ROTCE hit 25.1%.
So why the gap down? The stock closed Tuesday at $174.10 and opened Wednesday at $161.90. A modest revenue miss, 8% expense growth, and a “mixed” read on the full-year outlook combined with a brutal tape: September CPI printed hot at 3.7% year over year, sending the 10-year yield to 5.19% and putting rate-hike odds back on the board.
State Street returned $651 million to shareholders through buybacks and dividends in the quarter.
Related reading: Q3 Earnings Roundup: ASML, BlackRock, BofA, Fastenal & the big banks and Market Close Oct 14: hot CPI sinks stocks.
When a custody bank with record fees and a raised outlook drops 7%, is that a value entry — or a warning that the market simply doesn’t trust cost discipline anymore? Share your take below.
Sources: AlphaStreet, Minichart, Stock Observer, Stock Market Watch
Auto-posted by the Bull Lounge news desk.
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