BNY Mellon (BK) Q2 Earnings: What's In The Cards?

The Bank of New York Mellon Corporation (NYSE:BK) is scheduled to report second-quarter 2016 results on Jul 21, before the market opens.

Last quarter, BNY Mellon’s adjusted earnings came well ahead of the Zacks Consensus Estimate, driven by a dip in costs. However, deterioration in provision for loan losses and a marginal decline in top line acted as undermining factors.

Further, BNY Mellon has a decent earnings surprise history, as evident from the chart below:

BANK OF NY MELL Price and EPS Surprise

BANK OF NY MELL Price and EPS Surprise | BANK OF NY MELL Quote

Factors Impacting Q2 Results

Will BNY Mellon be able to maintain its earnings streak this quarter? Or will it succumb to the industry challenges? Let’s see how the things have shaped up for this earnings release.

Starting with expenses, management expects staff costs to decrease on a sequential basis in the second-quarter 2016 due to the escalation in the first quarter. On the other hand, an increase in resolution planning expenses is expected as the company is required to addresses issues raised regarding its living will. Nonetheless, the company’s overall expenses are likely to remain relatively stable sequentially.

On the revenue front, management anticipates a modest sequential increase in net interest income and net interest margin. Further, investment and other income is expected to be $60–$80 million.

Also, a strengthening U.S. dollar is expected to impact Investment Management revenues owing to its international presence. However, the impact of the same will be insignificant on the company’s overall financials.

Earnings Whispers

Our proven model indicates that the chances of BNY Mellon beating the Zacks Consensus Estimate this time around are quite low, as it does not have the right combination of two key components. Note that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for significantly higher chances an earnings beat.

Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 75 cents.

Zacks Rank: BNY Mellon’s Zacks Rank #4 (Sell) further lowers the chance of earnings beat. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Also, BNY Mellon saw three downward revisions in earnings estimates (versus one upward revision) over the last 30 days. Notably, the Zacks Consensus Estimate has remained stable over the last 7 days. Further, the Zacks Consensus Estimate for the second quarter indicates a year-over-year fall of about 2.11%.

Stocks That Warrant a Look

Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for Hancock Holding Co. (NASDAQ:HBHC) is +4.55% and it carries a Zacks Rank #3. The company is scheduled to release results on Jul 20.

The Earnings ESP for M&T Bank Corp. (NYSE:MTB) is +0.48% and it carries a Zacks Rank #3. The company is slated to release results on Jul 20.

Federated Investors, Inc. (NYSE:FII) has an Earnings ESP of +2.13% and a Zacks Rank #3. It is slated to report results on Jul 28.