BNY Mellon stock (NYSE: BK) has gained 9% year-to-date, in line with the S&P 500 index. Despite this, the stock is trading at a 10% discount to its fair value of $63 according to Trefis. The company has shown strong gains of 40% from early January 2021 to around $55 currently, outperforming the S&P 500 over a three-year period. However, the stock’s performance has been inconsistent with returns of 37% in 2021, -22% in 2022, and 14% in 2023, underperforming the S&P 500 in the last two years.
In the fourth quarter of 2023, BNY Mellon reported better-than-expected results with revenues increasing 10% year-over-year to $4.3 billion. The growth was driven by a 4% rise in net interest income and a 12% gain in total fee and other revenue. Assets under Custody and Administration rose by 8% to $47.8 trillion, while Assets under Management reached $1.97 trillion. However, total expenses as a percentage of revenues increased, leading to a 50% decrease in adjusted net income to $256 million.
For the full year 2023, BNY Mellon’s top line grew 7% to $17.5 billion, driven by a 24% increase in net interest income. Total expenses as a percentage of revenues decreased, resulting in a 33% improvement in adjusted net income to $3.15 billion. Looking ahead to Q1 and FY 2024, the company is expected to continue its positive trend with estimated revenues of $17.7 billion and an adjusted net income margin of around 22%, leading to an annual GAAP EPS of $5.31 and a valuation of $63.
Trefis highlights the difficulty of consistently beating the S&P 500 in recent years, even for heavyweights in the Financials sector and popular tech stocks. The Trefis High Quality Portfolio, on the other hand, has outperformed the S&P 500 each year by providing better returns with less risk. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, investors are wondering if BNY Mellon will face a similar situation as in 2022 and 2023 and underperform the S&P 500 in the next 12 months, or will it see a strong jump in performance.
Investors are encouraged to consider Trefis Market Beating Portfolios for potential investment opportunities based on their track record of outperforming the market. With BNY Mellon stock trading at a discount to its fair value and showing positive revenue growth, analysts believe the company has the potential for future success. As the financial sector continues to navigate challenges in the current economic landscape, it will be interesting to see how BNY Mellon performs in the coming months and if it can maintain its position as a market leader.
