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Raymond James upgrades State Street to 'strong buy'

Raymond James analysts David Long and Daniel Tamayo upgraded State Street Corp. to "strong buy" and reduced the 2019 EPS estimate for the company by 4 cents.

The analysts cited State Street's acquisition of Charles River Systems as one of the reasons for the upgrade, as it shows management's forward-thinking attitude and provides the company with an opportunity for revenue growth.

State Street's relatively bigger pool of AAA/AA-rated securities and its small loan pool lowers its credit risk, the analysts wrote.

State Street's shares trading at historically low valuations also supports the upgrade. "We believe STT shares deserve to trade at a smaller discount to the S&P 500 ... given its lower risk profile and improving revenue growth," said the analysts.

The analysts raised the EPS estimate for the last quarter of 2018 for the company by 4 cents, to $1.64.

The analysts reduced EPS estimates for 2019 by 4 cents and for 2020 by 15 cents due to lower servicing and management fees, and lower net interest income.