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Here's Why it is Best to Hold on to BNY Mellon (BK) Stock Now
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The Bank of New York Mellon Corporation’s (BK - Free Report) global diversification efforts and prudent cost-control initiatives are expected to keep supporting profitability. The company’s robust assets under management (AUM) balance will likely aid revenue growth in the quarters ahead.
However, due to the near-zero interest rate environment, its margins will likely remain under pressure, thus, hurting the top line to an extent.
Analysts have also been maintaining a neutral stance toward the stock. Over the past seven days, the Zacks Consensus Estimate for BNY Mellon’s current-year earnings has been unchanged. Thus, the company currently carries a Zacks Rank #3 (Hold).
Over the past six months, shares of the company have gained 31.3% compared with 54.8% growth recorded by the industry.
Looking at its fundamentals, non-interest expenses have declined, witnessing a compound annual growth rate (“CAGR”) of 1% over the past three years (ended 2020), driven by the cost-saving efforts. Moreover, despite continued investments in technology, operating expenses are expected to remain manageable in the upcoming quarters as the company eliminates unnecessary management layers and automates processes.
Also, BNY Mellon’s balance sheet remains solid. Its decent earnings strength and robust liquidity position indicate that it will likely be able to continue meeting debt obligations in the near term, even if the economic situation worsens.
Moreover, now, with the Federal Reserve easing restrictions on capital distributions amid the virus-induced crisis, BNY Mellon authorized $625 million worth of share repurchases for first-quarter 2021, while maintaining the dividend payout at 31 cents per share. Given its earnings strength, the company is expected to continue enhancing shareholder value through efficient capital deployments.
However, over the past five quarters, the company’s net interest margin (“NIM”) and net interest revenues (“NIR”) have been witnessing a persistent decline. In fact, given the current low-interest rate environment along with the Fed indicating no change in rates anytime soon, the company’s NIR and NIM are expected to continue to remain under pressure.
Further, fee income constituted more than 80% of BNY Mellon’s total revenues in 2020. Concentration risk emanating from higher dependence on fee-based revenues could significantly alter the company’s financial position if there is any change in individual investment preferences, regulatory amendments or a slowdown in capital market activities.
Stocks Worth Considering
A few better-ranked stocks from the finance space are mentioned below.
Waddell & Reed Financial, Inc.’s 2021 earnings estimates have increased 6.6% over the past 60 days. The company’s shares have gained 61.3% over the past six months. At present, it carries a Zacks Rank #2.
The Goldman Sachs Group, Inc. (GS - Free Report) has witnessed an upward earnings estimate revision of 14.4% for the current year over the past 60 days. It currently carries a Zacks Rank of 2. The stock has gained 77.6% over the past six months.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Here's Why it is Best to Hold on to BNY Mellon (BK) Stock Now
The Bank of New York Mellon Corporation’s (BK - Free Report) global diversification efforts and prudent cost-control initiatives are expected to keep supporting profitability. The company’s robust assets under management (AUM) balance will likely aid revenue growth in the quarters ahead.
However, due to the near-zero interest rate environment, its margins will likely remain under pressure, thus, hurting the top line to an extent.
Analysts have also been maintaining a neutral stance toward the stock. Over the past seven days, the Zacks Consensus Estimate for BNY Mellon’s current-year earnings has been unchanged. Thus, the company currently carries a Zacks Rank #3 (Hold).
Over the past six months, shares of the company have gained 31.3% compared with 54.8% growth recorded by the industry.
Looking at its fundamentals, non-interest expenses have declined, witnessing a compound annual growth rate (“CAGR”) of 1% over the past three years (ended 2020), driven by the cost-saving efforts. Moreover, despite continued investments in technology, operating expenses are expected to remain manageable in the upcoming quarters as the company eliminates unnecessary management layers and automates processes.
Also, BNY Mellon’s balance sheet remains solid. Its decent earnings strength and robust liquidity position indicate that it will likely be able to continue meeting debt obligations in the near term, even if the economic situation worsens.
Moreover, now, with the Federal Reserve easing restrictions on capital distributions amid the virus-induced crisis, BNY Mellon authorized $625 million worth of share repurchases for first-quarter 2021, while maintaining the dividend payout at 31 cents per share. Given its earnings strength, the company is expected to continue enhancing shareholder value through efficient capital deployments.
However, over the past five quarters, the company’s net interest margin (“NIM”) and net interest revenues (“NIR”) have been witnessing a persistent decline. In fact, given the current low-interest rate environment along with the Fed indicating no change in rates anytime soon, the company’s NIR and NIM are expected to continue to remain under pressure.
Further, fee income constituted more than 80% of BNY Mellon’s total revenues in 2020. Concentration risk emanating from higher dependence on fee-based revenues could significantly alter the company’s financial position if there is any change in individual investment preferences, regulatory amendments or a slowdown in capital market activities.
Stocks Worth Considering
A few better-ranked stocks from the finance space are mentioned below.
Hope Bancorp, Inc. (HOPE - Free Report) has witnessed an upward earnings estimate revision of 19.3% for 2021 over the past 60 days. Its shares have gained 101.2% over the past six months. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Waddell & Reed Financial, Inc.’s 2021 earnings estimates have increased 6.6% over the past 60 days. The company’s shares have gained 61.3% over the past six months. At present, it carries a Zacks Rank #2.
The Goldman Sachs Group, Inc. (GS - Free Report) has witnessed an upward earnings estimate revision of 14.4% for the current year over the past 60 days. It currently carries a Zacks Rank of 2. The stock has gained 77.6% over the past six months.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>