Performance of the finance sector stocks in first-quarter earnings has been impressive. Also, going forward, improving economy, higher interest rates, easing banking regulations and rise in demand for loans are expected to support the stocks’ financials.
Therefore, this a good time to add a few stocks from the sector to your portfolio. Today, we bring one such stock — The Bank of New York Mellon Corporation (BK - Free Report) — that continues to indicate strong fundamentals and improving prospects.
The stock has witnessed upward estimate revisions. The Zacks Consensus Estimate has moved 5.4% and 3.4% upward for 2018 and 2019, respectively, over the last 60 days. Also, this Zacks Rank #2 (Buy) stock has rallied 6.9% year to date against the industry’s fall of 0.6%.
Why it is the Right Time to Own the Stock
Revenue strength: The company has been recording a rise in revenues, given the improving economy and higher interest rates. The company’s net revenues have seen a compounded annual growth rate (CAGR) of 3.6% over the last three years (2015-2017). The company’s projected sales growth rate of 8.4% and 2.9% for 2018 and 2019, respectively, ensures continuation of the upward revenue trend.
Earnings growth: BNY Mellon witnessed 11.6% rise in earnings per share in the last three to five years, significantly above the industry average of 5.3%. This earnings momentum will likely continue in the near term, as reflected by the company’s projected earnings growth of 18.6% for 2018 and 7.4% for 2019.
Also, the company’s long-term (three to five years) estimated EPS growth rate of 7.8% promises rewards for investors.
Further, BNY Mellon has a decent earnings surprise history. The company delivered an average positive earnings surprise of 7.1% in the trailing four quarters.
Effective expense management: BNY Mellon’s cost-saving initiatives (launched in 2011) have started yielding results and have been constantly supporting the bottom line. Non-interest expenses have declined at a four-year (2014-2017) CAGR of 3.5%. Despite projecting to spend $250 million more as investment-related expenses, the company will likely to be able to control costs in the upcoming quarters.
Strong leverage: BNY Mellon’s debt/equity ratio is 0.77 compared to the industry average of 0.92, indicating lower debt level relative to the industry. The financial stability of the company will help it perform better under volatile and unpredictable business environments.
Other Stocks to Consider
Associated Banc-Corp (ASB - Free Report) has witnessed upward earnings estimate revision of 11.4% over the past 60 days for the current year. Also, its share price has increased 13.6% so far this year. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Commerce Bancshares, Inc.’s (CBSH - Free Report) earnings estimates for 2018 have been revised 2.8% upward over the past 60 days. The Zacks Rank #1 stock has gained 19.9% year to date.
Civista Bancshares, Inc. (CIVB - Free Report) , sporting Zacks Rank #1, has witnessed current-year earnings estimates moving 8.8% upward over the past 60 days. Further, its share price has increased 13.5% so far this year.
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