State Street Corporation (STT), Expected Beat Earnings Estimates: Should you Buy?

State Street Corporation (STT), is likely to report a decline in earnings year-over-year on lower revenues for its quarter ending December 2022. The consensus outlook is well-known and provides a clear picture of the company’s earnings. However, how actual results compare with these estimates could have a significant impact on the stock’s near-term price.

If these key numbers are higher than expected, the earnings report will be published on January 20, 2023. However, if these key numbers fall short of expectations, the stock might move lower.

Although the sustainability of the immediate price rise and future earnings expectations will depend on management’s discussions of business conditions during the earnings call, it is worth taking into account the possibility of a positive surprise in EPS.

Zacks Consensus Estimate

In its upcoming report, the company will post quarterly earnings at $1.97 per share. This is a change of -1.5% from last year.

Revenues are expected at $3.05 Billion, which is 0.2% less than the year-ago quarter.

Trend in Estimate Revisions

Over the past 30 days, the consensus EPS estimate has been raised 10.1% to the current level. This is mainly due to the fact that all of the analysts covering this period have reassessed their initial estimates.

Investors should remember that an aggregate change might not always reflect the direction in which each of the covering analysts revised their estimates.

Earnings Whisper

The estimates that are made ahead of an earnings release by a company can give clues about the business environment for the period. This insight lies at the heart of our surprise prediction model, Zacks earnings ESP (Expected Surprising Prediction).

The Zacks Earnings ESP compares most accurate estimates to the Zacks Consensus Estimate. For the quarter, the Most Accurate Estimate uses a newer version of the Zacks Consensus EPS estimate. This means that analysts who revise earnings estimates just before a release are updated with the most current information. In other words, it could be more accurate to their estimates than what they or others have predicted.

The model’s predictive power is therefore positive or negative Earnings ESP readings. This indicates that the earnings estimates could be off by a significant amount. Positive ESP readings are not affected by the model’s predictive ability.

When combined with a Zacks Rank #1, 2 or 3 (Buy), a positive Earnings ESP can be a strong predictor for an earnings beat. This combination produces a positive surprise almost 70% of the times. A solid Zacks Rank increases the predictive power for Earnings ESP.

A negative Earnings ESP reading does not necessarily indicate an earnings miss. Research shows it is hard to predict earnings beats for stocks with negative Earnings-ESP readings or Zacks rank of 4 (Sell), 5 (Strong Sell).

How have the numbers shaped up for State Street Corporation

State Street Corporation’s Most Accurate Estimate is greater than the Zacks Consensus Estimate. This suggests that analysts are now bullish about the company’s earnings prospects. This has translated into an Earnings ESP (ESP) of +1.58%.

The stock, on the other hand has a Zacks Rank #3.

This combination suggests that State Street Corporation will most probably beat the consensus EPS estimate.

Are Earnings Surprise History Any Clues?

Analysts look at how a company was able to meet consensus estimates in the past when estimating future earnings. For gauging the influence of the past surprise history on the future number, it is worth taking a look at it.

State Street Corporation was expected to post earnings of $1.79 per shares for the most recent quarter. However, earnings actually came in at $1.82. This surprise resulted in an increase of +1.68%.

The company beat consensus EPS estimates 4 times in the past four quarters.

Bottom Line

Stocks can move higher or down despite an earnings miss or beat. Many stocks lose ground despite an earnings beat. Investors may not be happy with the results. Unexpected catalysts are another reason why some stocks can gain despite a disappointing earnings report.

However, it is possible to increase your chances of success by betting on stocks that exceed earnings expectations. Before each quarter’s quarterly release, it is worth checking the Earnings ESP of a company and Zacks Rank. Use our Earnings ESP filter to find the best stocks you can buy or sell, before they have reported.

State Street Corporation seems to be a strong earnings-beat candidate. Investors need to be mindful of other factors when betting on this stock.

Industry Player Expected Results

Northern Trust Corporation (NTRS), one of the Zacks Banks – Major Regional stocks, is expected to report earnings of $1.83 per diluted share for the quarter ending December 2022. This figure indicates a change of -4.2% year-overyear. This quarter’s revenue will be $1.76 Billion, an increase of 5.7% over the year-ago quarter.

Over the past 30 days, the consensus EPS estimate of Northern Trust Corporation was 4.1% higher than the current level. A more accurate estimate of the Earnings has produced a ESP of 0.00%.

This Earnings ESP combined with a Zacks Rank #3 (Hold), makes it difficult for us to predict whether Northern Trust Corporation will surpass the consensus EPS estimate. The company has exceeded consensus EPS estimates twice in the past four quarters.

Keep up-to-date with future earnings announcements using the Zacks Earnings Calendar.

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