Northern Trust (NTRS) to Post Q3 Earnings: What to Expect?
Northern Trust Corporation’s NTRS third-quarter 2023 results are scheduled to be released on Oct 18, 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 surpassed the Zacks Consensus Estimate. Results were aided by a rise in net interest income (NII), driven by higher rates. An improvement in credit quality was another positive in the second quarter. However, a rising expense base and lower fee income were headwinds.
Northern Trust has a mixed earnings surprise history. Its earnings missed estimates in two of the trailing four quarters, met once and surpassed once, the negative surprise being 0.03%, 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 third-quarter earnings of $1.50 per share has moved marginally downward in the past week. The figure indicates a decline of 16.7% from the year-ago quarter’s reported number.
The Zacks Consensus Estimate for revenues is pegged at $1.72 billion, suggesting a decrease of 1.9% from the prior-year quarter’s reported figure.
Key Factors & Estimates for Q3
Loans & NII: The lending scenario was subdued for the quarter under review on higher interest rates and an uncertain macroeconomic backdrop. Specifically, demand for commercial and industrial loans stayed muted in the third quarter, per the Fed’s latest data. Moreover, demand for commercial real estate loans declined in the quarter under review from the second-quarter end.
Hence, a weaker lending environment is likely to have affected average interest-earning assets.
The Zacks Consensus Estimate of $133.17 billion for average earning assets indicates a marginal sequential decline.
Federal Reserve raised interest rates by another 25 basis points in the quarter under review. Thus, the policy rate reached 5-5.25% in July 2023, marking the 11th time FOMC has hiked interest rates in a tightening process that began in March 2022.
In September, the rate hike was paused. With this, interest rates reached 5.25-5.5% in the third quarter, marking the highest level in around 22 years.
Despite the high interest rate environment, softer loan demand and rising funding costs are anticipated to have negatively impacted NII in the to-be-reported quarter.
The Zacks Consensus Estimate for NII is pegged at $460 million, implying a sequential decline of 10.2%.
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.
Asset servicing fees comprise custody and fund administration, investment management, securities lending, and other fees.
The favorable equity market performance in the second quarter is likely to have led to an improvement in custody and fund administration, and investment management fees for NTRS in the third quarter.
The Zacks Consensus Estimate for custody and fund administration, and investment management fees is pegged at $433 million and $139 million, suggesting sequential increases of 1.4% and 3.7%, respectively.
The consensus estimate for asset servicing fees is pegged at $632 million, indicating a 1.8% sequential rise.
The consensus mark for wealth management servicing fees is pegged at $486 million, implying sequential growth of 2.3%.
The consensus estimate for consolidated trust, investment and other servicing fees is pegged at $1.1 billion, suggesting a 2% sequential rise.
In the third quarter, lower volatility in foreign exchange (FX) markets and decreased client activity are likely to have adversely impacted NTRS’s FX trading income. The Zacks Consensus Estimate for the metric is pegged at $48.2 million, indicating a 3.5% sequential decrease.
The consensus estimate for total fee income is pegged at $1.26 billion, indicating a 1.1% rise from the prior quarter’s reported figure.
Expenses: Northern Trust’s expenses are expected to have been high in the third 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) increases 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 0.00%.
Zacks Rank: Northern Trust currently carries a Zacks Rank of 3.
Banks Worth a Look
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post earnings beat this time:
Commerce Bancshares CBSH is scheduled to release third-quarter 2023 earnings on Oct 18. The company has an Earnings ESP of +1.98% and carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CBSH’s quarterly earnings estimates have moved marginally upward over the past week.
The Earnings ESP for Bank OZK OZK is +1.62% and it carries a Zacks Rank #3 at present. The company is slated to report third-quarter 2023 results on Oct 19.
Over the past 30 days, the Zacks Consensus Estimate for OZK’s quarterly earnings has moved 1.4% downward.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Northern Trust Corporation (NTRS) : Free Stock Analysis Report
Commerce Bancshares, Inc. (CBSH) : Free Stock Analysis Report
Bank OZK (OZK) : Free Stock Analysis Report
