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BNY Mellon's Revenue Growth on Track

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On Mar 5, 2014, we issued an updated research report on The Bank of New York Mellon Corporation (BK - Free Report) . The company has recently reported in-line fourth-quarter 2013 results. Results were aided by top line as well as asset growth, which were partially offset by increased provision for credit losses and higher operating expenses. The company’s fundamentals look strong, but the macroeconomic headwinds across the industry could drag its performance.

BNY Mellon reported fourth-quarter 2013 adjusted earnings of 54 cents per share, in line with the Zacks Consensus Estimate. However, this was a penny higher than the earnings posted in the year-ago quarter.

BNY Mellon’s performance in 2013 seemed decent as evident from its earnings history. The company delivered positive earnings surprises in 2013 with an average beat of 5.46%.

BNY Mellon’s continuous improvement in its operating efficiencies keeps organic growth in place. The company’s revenues have grown at a 5-year CAGR of 14.4% (2009-2013). Further, in 2013, the company achieved the gross savings target of $636 million (pre-tax basis) a year before. The targeted level of $650–$700 million was set for 2014.

Though BNY Mellon’s fundamentals look promising, we believe declining net interest margin (NIM) owing to a still low interest rate environment and the stringent regulatory landscape may pose threats to the company’s financials in the near term.

Further, a bearish stance of analysts on this stock is evident from the movement of the Zacks Consensus Estimate over the past 60 days. The Estimate for 2014 declined 2.8% to $2.43 per share. Also, for 2015, it fell 2.5% to $2.71 per share.

BNY Mellon currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Stocks that are worth considering in the finance sector include Fifth Third Bancorp (FITB - Free Report) , The PNC Financial Services Group, Inc. (PNC - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) . All these stocks hold a Zacks Rank #2 (Buy).

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