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State Street’s Second-Quarter Earnings and Acquisition Plan

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Strong second-quarter earnings

On July 20, State Street (STT) reported its second-quarter earnings. The second quarter ended on June 30. The company’s EPS was $2.05, which surpassed analysts’ expectations by $0.04. The company had an AUM (assets under management) of $2.7 trillion at the end of the second quarter. The AUM was flat on a sequential basis mainly due to long-term institutional outflows of $114 billion. In comparison, for T. Rowe Price Group’s (TROW) EPS, analysts gave an estimate of $1.8 for the June quarter. T. Rowe Price’s second-quarter earnings are scheduled to be released on July 25.

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During the second quarter, State Street saw net inflows of $3 billion in the fixed-income ETF category, which was offset by net outflows of $2 billion from equities and $1 billion from alternative investments. During the same period, the company saw a market appreciation of $35 billion. State Street’s competitor (XLF), Invesco (IVZ) is scheduled to report its second-quarter earnings on July 26. Franklin Resources (BEN) is scheduled to announce its earnings on July 27.

Missed revenue estimates

State Street garnered revenues of $3.03 billion in the second quarter and missed the estimates by $20 million. The company had assets under custody and administration of $33.9 trillion, which reflects 9% growth YoY (year-over-year). The company had total fee revenues of $2.4 billion in the second quarter, which represents an increase of 6% on a YoY basis.

Acquisition of Charles River Development

On July 20, State Street announced that it plans to acquire Charles River Development. State Street will pay $2.6 billion as part of the acquisition. State Street will revoke its share buyback plan. The decision had a negative impact on the stock price. On July 20, the stock closed at $85.87, which implies a fall of 7.41%.

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