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Here's Why You Should Hold on to Northern Trust for Now

Zacks Equity Research

Northern Trust Corporation NTRS has been adopting strategic initiatives, witnessing strong wealth management operations and enhancing shareholders’ value through regular dividend payments. Also, an improving rate environment has eased margin pressure and will continue to drive profits.

However, rising operating expenses despite the cost-saving measures remains a concern. Further, change in global economic condition makes us apprehensive as Northern Trust runs a global business.

Shares of Northern Trust have gained 14.9% over the past 12 months, underperforming 16.2% growth of the industry.

However, the company’s current-year earnings estimates remained stable over the last 30 days. The stock currently carries a Zacks Rank #3 (Hold).

A new business, which Northern Trust has set up in the last couple of years, continues to add institutional clients and assets, and also benefits from favorable equity market conditions. Moreover, the company’s innovative technology-driven hedge fund administration capabilities brought to the marketplace via Northern Trust Hedge Fund Services clearly provides an attractive proposition to clients.

Further, organic growth remains a key strength at Northern Trust, as reflected by its revenue growth trajectory. Revenues grew at a five-year (2012-2016) CAGR of 6.2%, with the trend continuing in 2017 on rising net interest income. We believe that the company is well positioned to maintain this trend.

On the flip side, despite the successful implementation of expense-reduction initiatives, costs escalated on investments in technology driving compensation and equipment and software expenses as well. Notably, non-interest expenses rose at a five-year (2012-2016) CAGR of 1.4%, with the increasing trend continuing in 2017. We believe that the rise in expenses will impede bottom-line growth.

Moreover, as Northern Trust runs a global business, changing conditions of the global financial markets and general economic conditions might affect it. Weak economic conditions had affected wealth creation, investment preferences, trading activities and savings patterns, which in turn impacted demand for trust and investment products and services.

Some better-ranked stocks in the same space are CoBiz Financial COBZ, CNB Financial CCNE and Republic Bancorp RBCAA, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CoBiz Financial has witnessed an upward revision in earnings estimates of 6.6% in 2017 over the last 60 days. Its share price has risen 34.8% in the past 12 months.

For CNB Financial, over the last 60 days, the Zacks Consensus Estimate has been revised 4.4% upward for 2017. The stock has rallied 12.4% in a year.

Republic Bancorp has witnessed an upward revision in earnings estimates of 4.7% for 2017 over the last 60 days. In the past 12 months, its share price has gone up 8.6%.

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Northern Trust Corporation (NTRS) : Free Stock Analysis Report
CNB Financial Corporation (CCNE) : Free Stock Analysis Report
Republic Bancorp, Inc. (RBCAA) : Free Stock Analysis Report
CoBiz Financial Inc. (COBZ) : Free Stock Analysis Report
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