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5 Reasons to Add BNY Mellon (BK) Stock to Your Portfolio Now
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The Bank of New York Mellon Corporation (BK - Free Report) stock looks like an attractive investment option now. The company’s global expansion efforts, robust assets under management (AUM) balance and a solid balance sheet are expected to aid revenues.
Analysts seem optimistic regarding the company’s earnings growth prospects. Over the past 60 days, the Zacks Consensus Estimate for BK’s 2024 earnings has been revised 2.9% upward. Thus, BNY Mellon currently carries a Zacks Rank #2 (Buy).
Looking at its price performance, BK shares have gained 14% over the past six months compared with the industry’s 11% growth.
Image Source: Zacks Investment Research
A few other factors mentioned below make the BNY Mellon stock worth betting on now.
Earnings Growth: BNY Mellon witnessed earnings growth of 6.4% in the past three to five years. The upward trend in earnings is expected to continue in the near term. In 2024 and 2025, its earnings are projected to grow 11.1% and 11%, respectively.
Moreover, the company’s long-term (three-five years) projected earnings growth rate of 10.1% offers rewards for shareholders.
BNY Mellon has an impressive earnings surprise history. The company's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9.9%.
Revenue Strength: While the company’s net interest revenue (NIR) and net interest margin (NIM) declined in 2020 and 2021 because of the low interest-rate environment, both metrics rebounded solidly thereafter. NIR recorded a five-year (ended 2023) compound annual growth rate of 3.8%. Likewise, NIM improved to 1.25% in 2023 from 0.97% in 2022, 0.68% in 2021 and 0.84% in 2020.
While NIR and NIM declined in the first half of 2024 due to higher funding costs, the metrics are anticipated to stabilize gradually in the next few quarters and then witness improvement over time, driven by higher rates.
In 2024 and 2025, the company’s sales are expected to grow 3.8% and 2.7%, respectively.
Strategic Growth Initiatives: BNY Mellon has been trying to gain a foothold in foreign markets and is undertaking several growth initiatives (including launching new services, digitizing operations and making strategic buyouts). In 2021, the company, through its subsidiary, acquired Optimal Asset Management.
Given the huge growth potential of overseas securities markets and a rise in complex new securities, the long-term growth prospects of the industry are encouraging. In the first half of 2024, non-U.S. revenues constituted 35% of total revenues. The company’s international revenues are expected to continue improving as the demand for personalized services rises across the globe.
Steady Capital Distributions: BNY Mellon’s capital distribution activities seem impressive. After the clearance of the 2024 stress test, the company hiked its quarterly cash dividend by 12% to 47 cents per share. Before this, it hiked dividends by 14% in July 2023 and 9% in July 2022.
In April 2024, the company announced a new share repurchase program worth $6 billion. It will be effective once the prior buyback plan, which has approximately $0.81 billion worth of buyback authorization left as of Jun 30, 2024, is fully utilized. Thus, driven by a strong capital position and earnings strength, the company will likely be able to sustain efficient capital distributions.
Favorable Valuation: BNY Mellon stock looks undervalued right now with respect to its PEG and price-to-earnings (P/E) (F1) ratios. It has a PEG ratio of 1.09, lower than the industry average of 1.33. Moreover, the company’s P/E (F1) ratio of 11.00 is below the industry average of 11.39.
The Zacks Consensus Estimate for HOMB’s current-year earnings has been revised 4.1% upward over the past 60 days. HOMB shares have gained 8.7% over the past six months.
Earnings estimates for CTBI have been revised 4.3% upward for the current year over the past 60 days. Over the past six months, the CTBI stock has risen 13.1%.
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5 Reasons to Add BNY Mellon (BK) Stock to Your Portfolio Now
The Bank of New York Mellon Corporation (BK - Free Report) stock looks like an attractive investment option now. The company’s global expansion efforts, robust assets under management (AUM) balance and a solid balance sheet are expected to aid revenues.
Analysts seem optimistic regarding the company’s earnings growth prospects. Over the past 60 days, the Zacks Consensus Estimate for BK’s 2024 earnings has been revised 2.9% upward. Thus, BNY Mellon currently carries a Zacks Rank #2 (Buy).
Looking at its price performance, BK shares have gained 14% over the past six months compared with the industry’s 11% growth.
Image Source: Zacks Investment Research
A few other factors mentioned below make the BNY Mellon stock worth betting on now.
Earnings Growth: BNY Mellon witnessed earnings growth of 6.4% in the past three to five years. The upward trend in earnings is expected to continue in the near term. In 2024 and 2025, its earnings are projected to grow 11.1% and 11%, respectively.
Moreover, the company’s long-term (three-five years) projected earnings growth rate of 10.1% offers rewards for shareholders.
BNY Mellon has an impressive earnings surprise history. The company's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9.9%.
Revenue Strength: While the company’s net interest revenue (NIR) and net interest margin (NIM) declined in 2020 and 2021 because of the low interest-rate environment, both metrics rebounded solidly thereafter. NIR recorded a five-year (ended 2023) compound annual growth rate of 3.8%. Likewise, NIM improved to 1.25% in 2023 from 0.97% in 2022, 0.68% in 2021 and 0.84% in 2020.
While NIR and NIM declined in the first half of 2024 due to higher funding costs, the metrics are anticipated to stabilize gradually in the next few quarters and then witness improvement over time, driven by higher rates.
In 2024 and 2025, the company’s sales are expected to grow 3.8% and 2.7%, respectively.
Strategic Growth Initiatives: BNY Mellon has been trying to gain a foothold in foreign markets and is undertaking several growth initiatives (including launching new services, digitizing operations and making strategic buyouts). In 2021, the company, through its subsidiary, acquired Optimal Asset Management.
Given the huge growth potential of overseas securities markets and a rise in complex new securities, the long-term growth prospects of the industry are encouraging. In the first half of 2024, non-U.S. revenues constituted 35% of total revenues. The company’s international revenues are expected to continue improving as the demand for personalized services rises across the globe.
Steady Capital Distributions: BNY Mellon’s capital distribution activities seem impressive. After the clearance of the 2024 stress test, the company hiked its quarterly cash dividend by 12% to 47 cents per share. Before this, it hiked dividends by 14% in July 2023 and 9% in July 2022.
In April 2024, the company announced a new share repurchase program worth $6 billion. It will be effective once the prior buyback plan, which has approximately $0.81 billion worth of buyback authorization left as of Jun 30, 2024, is fully utilized. Thus, driven by a strong capital position and earnings strength, the company will likely be able to sustain efficient capital distributions.
Favorable Valuation: BNY Mellon stock looks undervalued right now with respect to its PEG and price-to-earnings (P/E) (F1) ratios. It has a PEG ratio of 1.09, lower than the industry average of 1.33. Moreover, the company’s P/E (F1) ratio of 11.00 is below the industry average of 11.39.
Other Stocks to Consider
A couple of other top-ranked stocks from the finance space are Home Bancshares, Inc. (HOMB - Free Report) and Community Trust Bancorp, Inc. (CTBI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HOMB’s current-year earnings has been revised 4.1% upward over the past 60 days. HOMB shares have gained 8.7% over the past six months.
Earnings estimates for CTBI have been revised 4.3% upward for the current year over the past 60 days. Over the past six months, the CTBI stock has risen 13.1%.