Can You Bank on BNY Mellon's Earnings?

2013 is here, and earnings season has already started ramping up. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk reaction that turns out to be exactly the wrong move in response to the news.

Let's turn to Bank of New York Mellon (BK 0.89%). The financial services company isn't a traditional bank, but it makes the banking and other financial services that millions of customers take advantage of possible. Let's take an early look at what's been happening with Bank of New York Mellon over the past quarter, and what we're likely to see in its quarterly report on Wednesday morning.

Stats on Bank of New York Mellon

Source: Yahoo! Finance.

Will Bank of New York Mellon's earnings impress investors?
Analysts have high expectations for BNY Mellon, with earnings seen rising nearly 30% despite a much more modest gain in revenue. Yet the bank has fallen short of analysts' estimates in previous quarters, and a shortfall this time around might potentially lead to a pullback from the stock's 16% gain over the past three months.

Part of BNY Mellon's success over the years has come from the fact that it doesn't offer traditional deposit accounts or mortgage loans, instead focusing on providing services, most notably acting as custodian for assets belonging to other financial companies. That leaves BNY Mellon insulated from the mortgage scandals that have rocked Bank of America (BAC -0.13%), Citigroup (C -0.32%), and other well-known banking giants, but it also means that when its customer banks are doing well, BNY Mellon also tends to do well.

One challenge BNY Mellon has faced deals with its Dreyfus unit, whose money market mutual funds have struggled to deal with the current low-interest rate environment. With the SEC pushing for change in the industry, Dreyfus recently joined several peers, including Fidelity, in agreeing to disclose the net asset values of its money funds on a daily basis, improving transparency and potentially reducing systemic risks from the funds. Still, until rates rise, profits from Dreyfus money funds will be below long-term norms.

To get the best sense of where BNY Mellon stands, it will be important to compare its report with that of rival Northern Trust (NTRS 0.14%), which also reports on Wednesday. With Northern Trust seen posting more modest earnings growth but slightly higher revenue gains than BNY Mellon, the big question will be which company did better at taking advantage of a stronger customer base. If BNY Mellon can break out of its rut and post a nice earnings beat, the stock could have even more upside. 

Click here to add Bank of New York Mellon to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.