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Northern Trust (NTRS) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Northern Trust Corporation’s NTRS first-quarter results, scheduled for release on Apr 23, are expected to reflect a year-over-year fall in earnings and revenues.

Northern Trust uses a lag effect to calculate its corporate custody and investment management fees, i.e. the computations are based on the prior quarter-end valuations. Since the performance of equity markets was strong in the first quarter, the company will likely be able to register growth in custody, servicing and management fees.

Notably, the company provides majority of its asset-management services through the C&IS unit, which generates more than 50% of total revenues. A rise in revenues in this segment will boost the company’s overall revenues. However, the Zacks Consensus Estimate of $1.5 billion for sales for the to-be-reported quarter reflects a year-over-year decline of 1.2%.

Per the Zacks Consensus Estimate, C&I segment’s custody and fund administration fees are likely to decrease 2.4% year over year to $365 million. Also, investment management and securities lending revenues are projected to be down 7.3% year over year. However, securities revenues are expected to be up 5%.

Therefore, with mixed performance of its components, total C&I trust, investment and other servicing fees are likely to decline 2.6% year over year to $530 million.

Let’s have a look at what our quantitative model predicts:

Northern Trust has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold).

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Earnings ESP: The Earnings ESP for Northern Trust is +0.57%.

Zacks Rank: The combination of Northern Trust’s Zacks Rank #3 and a positive ESP makes us confident of an earnings beat.

Here are the other factors that might influence the company’s Q1 performance:

Controlled Expenses: With Northern Trust’s cost-saving initiatives underway, expenses in the quarter might have remained under control.

Foreign Exchange Trading Revenues to Remain Low: Given the lower foreign exchange (“FX”) trading volatility and mixed volumes in the first quarter, the company’s revenues from FX trading might remain low for the quarter.

Net Interest Income (NII) Might Disappoint: A decent lending backdrop, particularly in the areas of commercial and industrial, commercial real estate and consumer, will offer support to banks’ interest income, while weakness in revolving home equity loans (due to slowdown in originations as well as refinancing activities) will partially offset this. Nevertheless, flattening and sometimes, even inversion of the yield curve during the Jan-Mar quarter, is expected to negatively impact banks’ net interest margin.

Notably, average earnings assets are anticipated to decrease, thus, impacting the company’s NII. The consensus estimate of $114.2 billion reflects a 1.3% year-over-year decline in earning assets.

Further, activities of the company during the quarter under review were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $1.46 remained unchanged over the last seven days. Further, the figure reflects a year-over-year decline of 9.3%.

Northern Trust Corporation Price and EPS Surprise

Northern Trust Corporation Price and EPS Surprise | Northern Trust Corporation Quote

Stocks That Warrant a Look

Here are some stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for BankUnited, Inc. BKU is +1.89% and the stock currently carries a Zacks Rank of 3. The company is scheduled to release first-quarter results on Apr 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

SVB Financial Group SIVB has an Earnings ESP of +0.42% and holds a Zacks Rank of 3, at present. It is slated to report results on Apr 25.

T. Rowe Price Group, Inc. TROW has an Earnings ESP of +2.19% and carries a Zacks Rank #2, currently. It is set to release Mar-end quarter figures on Apr 24.

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