The Bank of New York Mellon Corporation (BK - Free Report) is well poised for bottom-line growth, given its efficient cost-saving initiatives. Also, easing margin pressure should aid top-line growth. However, higher dependence on fee-based income as a source of revenue makes us a little apprehensive.
Analysts have maintained a neutral stance on the company’s earnings growth potential. As a result, its Zacks Consensus Estimate for the current-year earnings has remained stable over the past 30 days.
Looking at the fundamentals, the company’s non-interest expenses have declined at a three-year (2014-2016) CAGR of 7%. Given, the consistent cost-saving initiatives, the company remains well poised to lower its overall costs. Declining expenses are expected to continue to support bottom-line growth in the near term.
Also, amid an improving operating environment and with the increase in interest rates, pressure on the company’s net interest margin (NIM) seems to be gradually easing. Notably, management expects any further rate hike to positively impact margins as well as net interest revenue.
Given a solid capital position, the company is expected to continue enhancing shareholder value through efficient capital-deployment activities.
However, more than 75% of BNY Mellon’s revenue is generated from fee income. The concentration risk arising from significant dependence on fee-based revenues could alter the company’s financial position if there is any change in individual investment preferences or a slowdown in capital market activities.
Mentioned below are a few stocks from the finance space, which you may consider.
The earnings estimate of Raymond James Financial, Inc. (RJF - Free Report) has been revised upward for the current fiscal year over the last 60 days. Its share price has increased more than 40% in the past year.
M&T Bank Corporation’s (MTB - Free Report) earnings estimates have been revised upward for the current year over the last 60 days. Its shares have gained more than 30% in a year’s time.
The PNC Financial Services Group, Inc.’s (PNC - Free Report) Zacks Consensus Estimate for current-year earnings has also been revised up in the last 60 days. Its share price has increased more than 45% in the last 12 months.
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