Northern Trust (NTRS) to Post Q2 Earnings: Will it Disappoint?
Northern Trust Corporation’s NTRS second-quarter 2023 results are scheduled to release on Jul 19, before market open. The company’s revenues and earnings are expected to have declined from the year-ago reported levels.
In the last reported quarter, NTRS’ earnings met the Zacks Consensus Estimate. Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income (NII), driven by higher rates, acted as a tailwind.
Northern Trust has a disappointing earnings surprise history. Its earnings missed estimates in three of the trailing four quarters and met once, the negative surprise being 1.89%, on average.
Northern Trust Corporation Price and EPS Surprise
Northern Trust Corporation price-eps-surprise | Northern Trust Corporation Quote
NTRS’ activities in the to-be-reported quarter were inadequate to win analysts’ optimism. As a result, the Zacks Consensus Estimate for second-quarter earnings of $1.64 per share has moved 1.2% downward in the past week. The figure indicates a decline of 11.83% from the year-ago quarter’s reported number.
The Zacks Consensus Estimate for revenues is pegged at $1.76 billion, suggesting a decrease of 0.68% from the prior-year quarter’s reported figure.
Key Factors & Estimates for Q2
Loans & NII: The lending environment weakened during the quarter under review. Per Fed’s latest data, commercial real estate loans witnessed softer demand during the first two months of the quarter to be reported. Further, the challenging macroeconomic backdrop and high interest rates hurt consumer spending, affecting growth of personal loans during the quarter under review.
Hence, a weaker lending environment is likely to have affected average interest-earning assets.
The Zacks Consensus Estimate of $132.01 billion for average earning assets indicates a 2.9% decline sequentially.
While Fed kept rates unchanged during the June FOMC meeting, it increased rates by 25 basis points in May. The policy rate now stands at 5-5.25%.
Despite the high interest rate environment, softer loan demand and rising funding costs are anticipated to have negatively impacted NII during the to-be-reported quarter.
The Zacks Consensus Estimate for NII is pegged at $504 million, implying a sequential decline of 5.1%.
Fee Income: Northern Trust uses a lag effect to calculate its asset servicing fees and wealth management servicing fees, i.e., computations are based on the prior-quarter end valuations.
The asset servicing fees comprise of custody and fund administration, investment management, securities lending as well as other fees.
The favorable equity market’s performance in the first quarter is likely to have led to an improvement in custody and fund administration, and investment management fees for NTRS in the second quarter.
The Zacks Consensus Estimate for custody and fund administration, and investment management fees is pegged at $419 million and $127 million, suggesting sequential increases from $414 million and $126 million, respectively.
The consensus estimate for asset servicing fees is pegged at $616 million, indicating 2.2% rise sequentially.
The consensus mark for wealth management servicing fees is pegged at $488 million, projecting sequential growth of 5.9%.
The consensus estimate for consolidated trust, investment and other servicing fees is pegged at $1.1 billion, remaining flat from first-quarter 2023.
During the second quarter, lower volatility in foreign exchange (FX) markets and decreased client activity are likely to have adversely impacted NTRS’s FX trading income. Nonetheless, the Zacks Consensus Estimate for the metric is pegged at $57 million, indicating a 7.5% sequential rise.
Treasury management fees are likely to have improved sequentially in the quarter to be reported. The consensus estimate for the same is pegged at $8.49 million, implying a rise of 1.1%.
However, the Zacks Consensus Estimate for security commissions and trading income is pegged at $33.64 million, indicating a decline of 3.1% sequentially.
The Zacks Consensus Estimate for other operating income is pegged at $46.55 million, suggesting a sequential decline from $46.80 million.
The consensus estimate for total fee income is pegged at $1.25 billion, indicating a 2.7% rise from the prior quarter’s reported figure.
Expenses: Northern Trust’s expenses are expected to have remained high in the second quarter on rising compensation, and equipment and software expenses. Moreover, general inflationary pressures are likely to have inflated costs whereas wage inflation is anticipated to have escalated personnel expenses.
What Does the Zacks Model Say?
Our proven Zacks model does not conclusively predict an earnings beat for Northern Trust this time around. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increase the odds of an earnings beat. But that's not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Northern Trust has an Earnings ESP of -0.40%.
Zacks Rank: Northern Trust currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
First Citizens BancShares, Inc. FCNCA and Byline Bancorp, Inc. BY are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for FCNCA is +3.21% and the stock currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
BY currently has an Earnings ESP of +3.59% and a Zacks Rank #3. It is scheduled to release second-quarter 2023 results on Jul 27.
The Zacks Consensus Estimate for BY’s second-quarter earnings has remained unchanged over the past 60 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Northern Trust Corporation (NTRS) : Free Stock Analysis Report
First Citizens BancShares, Inc. (FCNCA) : Free Stock Analysis Report
Byline Bancorp, Inc. (BY) : Free Stock Analysis Report
