BNY Mellon stock (NYSE: BK) has seen a YTD gain of 9%, which is on par with the S&P 500 index performance over the same period. Despite this, the stock is currently trading below its estimated fair value of $63 per share. The stock has shown strong gains of 40% from early January 2021 to around $55, but the increase has not been consistent. Returns for BK stock were 37% in 2021, -22% in 2022, and 14% in 2023, indicating underperformance compared to the S&P 500 in 2022 and 2023. The Trefis High Quality Portfolio, on the other hand, has outperformed the S&P 500 consistently over recent years, providing better returns with less risk.
BNY Mellon posted better-than-expected results in the fourth quarter of 2023, with revenues increasing 10% year-over-year to $4.3 billion. The increase was driven by a rise in net interest income and total fee and other revenue. Despite an increase in investment servicing fees, investment management revenues saw a decline. Assets under Custody and Administration (AuC/A) and Assets under Management (AuM) also saw growth. However, total expenses as a percentage of revenues increased in the quarter, leading to a 50% year-over-year decrease in adjusted net income to $256 million.
In FY 2023, BNY Mellon’s top line grew 7% year-over-year to $17.5 billion, with a significant jump in net interest income and a slight increase in total fee and other income. Total expenses as a percentage of revenues decreased during the year, 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 see continued growth in revenues, with an estimated revenue of $17.7 billion for the year. The adjusted net income margin is projected to be around 22%, leading to an annual GAAP EPS of $5.31 and a valuation of $63 per share based on a P/E multiple of just below 12x.
Despite the positive financial results and growth projections, there are concerns about BNY Mellon potentially underperforming the S&P 500 in the current macroeconomic environment. With high oil prices and elevated interest rates, there is uncertainty about how BNY Mellon will perform over the next 12 months. The company will need to navigate these challenges and maintain its financial performance to meet market expectations and potentially see a strong jump in its stock price.
Overall, BNY Mellon stock has shown strong gains, despite some periods of underperformance compared to the S&P 500. The company’s financial results in the fourth quarter of 2023 and FY 2023 were positive, with growth in revenues and improved net income. Looking ahead to Q1 and FY 2024, the company is expected to continue on a growth trajectory, with estimated revenues of $17.7 billion and a valuation of $63 per share. Investors will be watching closely to see how BNY Mellon navigates the current macroeconomic challenges and whether it can maintain its financial performance and potentially outperform the market in the coming months.
