BNY Mellon stock (NYSE: BK) has seen a 16% increase year-to-date (YTD), in line with the S&P500 index. Comparatively, its peer BlackRock (NYSE: BLK) saw a 5% YTD increase. Despite this growth, BK is currently trading 7% below its fair value estimate of $65 per share, according to Trefis. The stock has experienced significant gains in 2021, with a 50% increase from $40 to $60, but has seen fluctuations in performance over the years, underperforming the S&P 500 in 2022 and 2023.
In the first quarter of 2024, BNY Mellon surpassed street estimates with total revenues of $4.5 billion, up 3% year-over-year (y-o-y), driven by a 6% increase in total fee and other revenue. However, there was an 8% decrease in net interest income due to a lower net interest margin. Assets under Custody and Administration rose by 5% y-o-y to $48.8 trillion, while Assets under Management increased by 6% to $2 trillion, leading to an adjusted net income of $982 million, up 7% y-o-y.
In fiscal year 2023, BNY Mellon’s top line grew 7% y-o-y to $17.5 billion, primarily due to a 24% rise in net interest income and a 2% increase in total fee and other income. Total expenses as a percentage of revenues decreased, resulting in a 33% improvement in adjusted net income to $3.15 billion. The company expects its second quarter results to be consistent, with consensus estimates projecting revenues of $4.52 billion and earnings of $1.42.
Looking ahead, BNY Mellon’s revenues are forecasted to reach $18.02 billion in FY2024, with an adjusted net income margin of around 22.5% and an annual GAAP EPS of $5.45. With a price/earnings (P/E) multiple of just below 12x, the stock is expected to reach a valuation of $65. Despite the current uncertain macroeconomic environment, characterized by high oil prices and elevated interest rates, BNY Mellon is positioned to deliver strong performance in the coming months.
The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over recent years, providing better returns with less risk compared to the benchmark index. In contrast, individual stocks, including those in the Financials sector and popular megacap companies, have struggled to consistently beat the S&P 500. As investors navigate the volatility in the market, BNY Mellon’s solid financial performance and strategic positioning make it an attractive investment option.
Overall, BNY Mellon’s stock has shown resilience and growth potential, with strong financial results in the first quarter of 2024 and a positive outlook for the rest of the year. Despite short-term fluctuations in performance, the company is expected to deliver solid revenues and earnings, driven by growth in fee income and disciplined cost management. With a focus on value and long-term growth, BNY Mellon remains a compelling investment opportunity for investors seeking stable returns in a dynamic market environment.
