UPDATE: Citigroup Downgrades Bank of New York Mellon Corporation to Neutral, Reiterates $27 PT
In a report published Friday, Citigroup downgraded its rating on Bank of New York Mellon Corporation (NYSE: BK) from Buy to Neutral, and reiterated its $27.00 price target.
Citigroup noted, “Our downgrade is based both on valuation as well as our concern that BK's 4Q12 results may fall short of investor expectations. Since late September, BK is up ~15% versus STT and NTRS which are up ~10% and ~8%, respectively, and the BKX which is up ~5% over the same period. BK currently trades at ~11.1x our estimated '13 EPS which we note is at the high end of its two-year range. We note that various public metrics suggest that BK was not being overly bearish: the 3ML-FF spread compressed ~12 bps q/q, FX trading volumes and vol fell to a multi-year low. Also, BK said the 4Q drag on its DR business would be ~$100 mm. As a result, we have reduced our 4Q12 estimate from $0.59 to $0.55. Although our revised 4Q12 estimate is in line with consensus, we nonetheless believe a negative earnings surprise is more likely than a positive surprise either in terms of 4Q12 results or 2013 guidance. Given this setup and the run in the stock, we see no reason to be long into the quarter.”
Bank of New York Mellon Corporation closed on Thursday at $26.58.
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