State Street Corporation STT is well poised for growth, given its global network, wide range of innovative products and services, sturdy capital position and easing margin pressure. Shares of the company have gained 18.2% so far this year, outperforming the 8.9% rally for the industry it belongs to.

However, the company’s expenses have been increasing for the last few years. Elevated expenses are likely to hurt bottom-line growth in the near term.

Notably, its Zacks Consensus Estimate for the current-year earnings has remained stable in the last seven days. Thus, the stock currently carries a Zacks Rank #3 (Hold).

Looking at the fundamentals, State Street’s revenues have increased at a CAGR of 1.5% over the past five years (2012–2016), primarily driven by higher management fees and securities finance income. Moreover, revenues are expected to continue rising, given the company’s continued investment in new products and the acquisition of GE Asset Management.

Also, with the economic recovery and the gradual change in rate environment, pressure on State Street’s net interest margin (NIM) seems to be easing. Given the optimistic view on future rate hikes, the company’s margin is expected to improve further, thereby supporting top-line growth.

Moreover, with a stable capital position and impressive earnings strength, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.

However, continuously rising expenses remain a major concern for the company. Expenses have witnessed at a five-year (2012–2016) CAGR of 4.1%, primarily due to an increase in compensation, and acquisition and restructuring costs. Elevated expenses are likely to curb bottom-line growth in the quarters ahead.

A few better ranked stocks from the finance space are Interactive Brokers Group, Inc. IBKR, Stifel Financial Corporation SF and TD Ameritrade Holding Corporation AMTD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings estimates for Interactive Brokershave been revised 5.8% upward for 2017 over the past 30 days. Its share price has risen more than 57% over the last six months.

Stifel Financial’s earnings estimates have been revised upward by 1.5% for the current year in the past 30 days. Also over the last six months, its share price has increased 16.7%.

TD Ameritrade has witnessed an upward earnings estimate revision of 11.7% for the current fiscal year in the past 30 days. Also, its share price has seen a 35.5% rise over the last six months.

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State Street Corporation (STT): Free Stock Analysis Report
 
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TD Ameritrade Holding Corporation (AMTD): Free Stock Analysis Report
 
Stifel Financial Corporation (SF): Free Stock Analysis Report
 
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