State Street: Slow And Steady Wins The Race

Oct.17.12 | About: State Street (STT)

State Street (NYSE:STT) has been a slow and steady in my portfolio since I added it back in late 2011. It just reported earnings that beat estimates and gave solid reasons it will remain a core part of my value portion of my portfolio.

Key highlights from State Street's earnings report:

  • Using GAAP earnings, State Street's net income rose to $654 million, or $1.36 a share, from $543 million, or $1.10, a year earlier.
  • Its Tier 1 common ratio, rose in the third quarter to 11.3 percent from 11 percent.
  • The company repurchased 11.4 million shares of common stock in the third quarter for $480 million. The company has $840 million remaining in a $1.8 billion repurchase program that expires in March 2013.
  • State Street won new business mandates in the quarter that added $211 billion to custody assets and $78 billion to investment assets. In addition, the company's custody assets climbed 10 percent Y/Y to $17.3 trillion.
  • Nelson Peltz has gained three new allies in his activist strategy to force shareholder friendly actions at the company.

State Street Corporation provides various financial products and services to institutional investors worldwide. It is one of the largest custodial entities in the world.

4 additional reasons State Street is still a great value stock at just over $43 a year:

  1. The company has an A+ rated balance sheet and the stock yields 2.3% and it has hiked its dividend payout by an average of 7.5% over the past five years.
  2. The mean price target of the 21 analysts that cover the stock is $49 a share. S&P has a "buy" rating and a $50 a share price target on STT.
  3. STT is cheap at 7% over book value, 10 times forward earnings and a reasonable five year projected PEG (1.29) for low beta, dividend paying stock.
  4. The stock is still selling near the bottom of its five year valuation based on P/B and P/CF as well.

Disclosure: I am long STT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.