State Street Vs BlackRock: Which Finance Stock is the Better Buy After Q2 Earnings?

Being two of the largest global financial institutions, State Street STT and BlackRock BLK stock had hovered near 52-week highs ahead of their Q2 reports on Tuesday, July 15.

Able to exceed their earnings expectations, investors may be wondering which of these renowned asset managers is the better investment at the moment. To that point, State Street is recognized for its expertise in custody and ETF servicing, while BlackRock has a more clear-cut focus on technology and data analytics, with platforms like ALADDIN, its Asset, Liability, Debt, and Derivative Investment Network.   

Being formidable competitors in regard to institutional asset servicing, let’s see which finance stock may be the better buy at the moment.

State Street’s Strong Q2 Results

Reporting Q2 earnings of $2.53 per share, State Street surpassed the Zacks EPS Consensus of $2.36 by 7%. Furthermore, this was a 17% increase from EPS of $2.15 in the prior year quarter. On the top line, State Street reported record Q2 sales of $3.44 billion, which increased 8% from $3.19 billion a year ago and edged estimates of $3.37 billion.

State Street’s strong Q2 results were driven across multiple business lines, with fee revenue spiking 12%, driven by servicing, management, and software fees, along with a 27% surge in FX trading volumes.  

BlackRock’s Mixed Q2 Results

As the world’s largest asset manager, BlackRock’s Q2 EPS of $12.05 beat expectations of $10.71 by 12% and spiked 16% from $10.36 a share in the comparative quarter. However, sales of $5.42 billion missed estimates of $5.44 billion despite rising 13% from $4.8 billion in Q2 2024.

Still, BlackRock continued to see “proof points” in its strategy, generating 7% organic base fee growth and over $650 billion in net inflows, which were attributed to record inflows for its iShares ETFs, fixed income, systematic tax-managed strategies in Aladdin, and expansions in private markets.

State Street & BlackRock’s Record AUM

In addition to their Q2 highlights, State Street and BlackRock hit new peaks in terms of Assets Under Management (AUM). State Street‘s AUM was up 17% year over year to $5.1 trillion, with BlackRock’s increasing 18% and becoming the first asset manager to surpass $12 trillion in AUM ($12.53 trillion).

STT & BLK Dividend Comparison

Making State Street’s quarterly report stand out was that the company announced plans to raise its quarterly dividend by 11% to $0.84 per share from $0.76. More intriguing, State Street’s current dividend yield of 2.98% already tops BlackRock’s 1.99% and pleasantly tops the Zacks Finance Sectors' 1.97% average.

STT & BLK Valuation Comparison

What further stands out about State Street stock is that STT trades at a significant discount to the broader market at 10.5X forward earnings. In comparison, BlackRock shares trade at a reasonable 22.5X forward earnings multiple but not at a lofty discount to the benchmark S&P 500’s 24.1X.

Conclusion & Final Thoughts

Initially, there appeared to be some profit taking after State Street and BlackRock’s Q2 reports, as STT and BLK are still up over +4% year to date and are sitting on gains of more than +20% in the last year. That said, both of these top finance stocks should remain viable investments for the time being as two of the leading asset management companies.

For now, State Street stock boasts a Zacks Rank #1 (Strong Buy) and may be the more appealing option considering its enticing dividend and P/E valuation. On the other hand, BlackRock stock sports a Zacks Rank #2 (Buy) and has made strides in its ETF servicing, while being a superior technological and data-driven company.  

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This article originally published on Zacks Investment Research (zacks.com).

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