A year-over-year decline in earnings but slightly higher revenue are expected from BNY Mellon (NYSE:BK) when it reports its third quarter earnings before the stock market opens on Tuesday, October 17.
Wall Street analysts, on average, expect the bank to report earnings per share of $1.14 on revenue of $4.30 billion for the quarter ending in September.
This compares to EPS of $1.21 and revenue of $4.28 billion in the year-ago quarter.
Analysts at Bank of America (BoA) are bullish on the stock, reiterating their ‘Buy’ rating and $55 price objective ahead of BNY Mellon (NYSE:BK)'s earnings report.
Shares of BNY Mellon (NYSE:BK) traded up 1.3% at about US$41.70 on Monday afternoon.
“In an environment where peers have struggled with navigating the rapid rise in interest rates, we believe management has done a solid job in delivering on its targets,” they wrote in a note to clients.
“While it's early days, we believe a track record of consistent execution combined with confidence that strategic initiatives are paying off in driving topline revenue growth should drive a valuation re-rating and stock outperformance.”
The BoA analysts believe investors are underestimating the potential upside from strategic actions underway at BNY Mellon that they believe should lead not only to improved efficiencies but also jumpstart revenue growth.
“Management actions to better service ‘platforming’ its customer base has the potential to unlock a multi-year growth-run that we think should lead to a re-rating in valuation multiples,” they wrote.
Limited credit risk, tailwind to net interest income from a short-duration asset profile, and an asset-light business model should combine to drive stock outperformance, they wrote.
They added that the company is in the midst of a cultural overhaul under new CEO Robin Vince, who took the helm in 2020 after spending more than 20 years at Goldman Sachs (NYSE:GS).
“The changes at the top are noticeable with several new senior hires since Mr. Vince joined, including CFO Dermot McDonogh who joined from Goldman Sachs (NYSE:GS) earlier this year,” they wrote.
“Management also highlighted its summer graduate program that should help with this cultural shift while also contributing towards efficiency improvement (backfilling senior departures).”
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