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Northern Trust Rallies 9.1% Year to Date: What's Driving It?

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During the last earnings season, financial stocks put up a decent show. One such major bank — Northern Trust Corporation NTRS — has rallied 9.1% year to date, significantly outperforming the industry’s growth of nearly 1.4%.

This price performance is backed by the gradually improving operating environment and rate hike scenario, which is beneficial for banks. Moreover, lower commercial tax rate are likely to boost banks’ profitability further. In addition, relieving banks from some of the stringent requirements of the Dodd-Frank Act has made the companies optimistic of future earnings growth and raised investors’ sentiments as well.

Northern Trust is supported by sturdy wealth-management operations with diversified products and services. The company’s focus on initiating new business to tackle macroeconomic headwinds, and continued addition of institutional clients and assets is anticipated to yield positive results for the stock.

This apart, Northern Trust is part of the industry, which has a Zacks Industry Rank #34 (top 13%).

Additionally, estimates for this Zacks Rank #2 (Buy) stock have been on an upswing, of late. Over the last 60 days, the Zacks Consensus Estimate moved up 2.8% for 2018 and 2.9% for 2019, respectively.

Fundamentally, Northern Trust’s revenues witnessed compounded annual growth rate (CAGR) of 7.1%, over the last five years (2013-2017), with the increasing trend continuing in first-half 2018 as well. This impressive top-line growth was aided by the continued addition of new business, and institutional clients and assets, along with rising net interest income.

Northern Trust’s earnings have jumped 13.6% annually over the last three to five years. The earnings growth momentum is anticipated to continue in the near term as well. The company’s projected EPS (earnings per share) growth (F1/F0) is 35.82% for 2018 and (F2/F1) around 8.91% for 2019.

Northern Trust’s debt/equity ratio is valued at 0.34 compared to the industry average of 0.92, indicating lower debt burden relative to the industry. It highlights the financial stability of the company even in an unstable economic environment.

Northern Trust’s ROE of 15.02%, as compared with the industry average of 11.7%, highlights the company’s commendable position over its peers. Notably, ROE has exceeded the company’s target between 10% and 15%.

Though there was a sequential uptick in the third quarter of 2012, credit quality improved and continued to move toward a normalized level in 2013 and thereafter. Notably, provision for credit losses remained low in 2014, driven by an improvement in commercial and institutional, along with commercial and residential real estate loans. Furthermore, provisions recorded benefits in 2015, 2016, 2017 and first-half 2018. We believe, with the continuation of such a favorable trend in the future, the company will be able to strengthen its earnings.

Other Stocks to Consider

SunTrust Banks, Inc. STI has been witnessing upward estimate revisions, for the last 60 days. Year to date, the company’s share price has been up more than 15%. It currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comerica Incorporated CMA has been witnessing upward estimate revisions, for the last 60 days. Additionally, the stock has climbed nearly 14.5%, year to date. It currently sports a Zacks Rank #1.

M&T Bank Corporation MTB has been witnessing upward estimate revisions, for the last 60 days. Also, this Zacks #2 Ranked company’s shares have risen nearly 3.6%, year to date.

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