BNY Mellon stock has outperformed its peer BlackRock this year, with a 16% gain YTD compared to BlackRock’s near zero return. The company is set to release its fiscal Q2 2024 results on July 12, where it is expected to exceed revenue estimates while earnings are likely to meet expectations. In the previous quarter, BNY Mellon surpassed street expectations with a 3% increase in revenues, driven by a rise in fee revenue but offset by a decrease in net interest income. Assets under Custody and Administration (AuC/A) and Assets under Management (AuM) also showed positive growth. Revenues are forecasted to reach $18.02 billion in FY2024, with Q2 revenues estimated to be $4.56 billion.
Although BNY Mellon stock has shown strong gains of 50% since early 2021, the increase has not been consistent, with returns of 37% in 2021, -22% in 2022, and 14% in 2023. Comparatively, the S&P 500 had returns of 27%, -19%, and 24% during the same periods, showing underperformance by BNY Mellon. In the current uncertain economic environment, investors are questioning whether BNY Mellon will continue to underperform or see a strong jump in the next 12 months. Trefis forecasts a valuation of $65 per share for BNY Mellon, 8% above the current market price of $60.
BNY Mellon’s revenues are expected to exceed expectations in Q2, following a 7% y-o-y growth to $17.5 billion in FY 2023. The bank generates around 80% of its revenue from fees and other income, with a 6% increase to $3.5 billion in Q1 driven by growth in investment services fees. Despite a decrease in net interest margin leading to an 8% drop in NII in Q1, it is expected to see growth in Q2. Trefis estimates revenues to touch $18.02 billion in FY2024, with Q2 revenues estimated at $4.56 billion. Earnings per share (EPS) are likely to match the consensus estimate of $1.43.
BNY Mellon’s adjusted net income grew 33% y-o-y to $3.15 billion in FY 2023, with an expected annual EPS of $5.45 for 2024. The bank’s operating margin slightly increased in Q1, and a continuation of this trend is expected in Q2. The stock price estimate is 8% higher than the current market price, with a valuation derived from an EPS estimate of $5.45 and a P/E multiple of close to 12x in fiscal 2024. Trefis’s analysis suggests that BNY Mellon’s stock has the potential for growth and may outperform expectations in the upcoming quarter and beyond.
