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Why Is Northern Trust Corporation (NTRS) Up 14% Since Last Earnings Report?

It has been about a month since the last earnings report for Northern Trust Corporation (NTRS). Shares have added about 14% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Northern Trust Corporation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Northern Trust Q3 Earnings Lag Estimates, NII Dips Y/Y

Northern Trust’s third-quarter 2023 earnings per share of $1.49 missed the Zacks Consensus Estimate of $1.50. However, the bottom line declined 17% year over year.

Results have been affected by a fall in NII. A deterioration in the credit quality was another headwind in the third quarter. However, a rising fee income was a positive.

Net income was $327.8 million, down 17% year over year.

Revenues Increase, Costs Rise

Quarterly total revenues (GAAP basis) of $1.73 billion were down 2% year over year. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $1.72 billion.

NII was $469.4 million in the quarter under review, down 11% year over year. The NIM was 1.45%, falling from 1.58% in the prior-year quarter.

Trust, investment and other servicing fees totaled $1.1 billion, up 3% from the year-ago quarter. Other non-interest income was $158.4 million, down 3% from the prior-year quarter.

Non-interest expenses increased 4% to $1.27 billion in the reported quarter.

AUM and AUC Fall

As of Sep 30, 2023, Northern Trust’s total AUC decreased 2% year over year to $11.01 trillion. Also, total AUM fell 2% to $1.33 trillion.

Credit Quality Deteriorates

Total allowance for credit losses was $211.8 million, increasing 8% year over year. Northern Trust recorded provisions for credit losses of $14 million in the third quarter compared with $0.5 million in the year-ago quarter.

Total non-accrual assets plunged 9.5% to $69.1 million as of Sep 30, 2023.

Capital Ratios Improve, Profitability Declines

Under the Standardized Approach, as of Sep 30, 2023, the Common Equity Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio were 11.4%, 14.5% and 7.9% compared with 11.3%, 12.2% and 7%, respectively, in the prior-year quarter.

Return on average assets was 0.93%, down from 1.07% in the year-ago quarter. Also, the return on average common equity was 11.6% compared with the year-earlier quarter’s 14.9%.

Capital Deployment Activities

In the reported quarter, Northern Trust returned $158.7 million to shareholders through share repurchases and dividends.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -12.23% due to these changes.

VGM Scores

Currently, Northern Trust Corporation has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Northern Trust Corporation has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Northern Trust Corporation belongs to the Zacks Banks - Major Regional industry. Another stock from the same industry, JPMorgan Chase & Co. (JPM), has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

JPMorgan Chase & Co. reported revenues of $39.87 billion in the last reported quarter, representing a year-over-year change of +21.9%. EPS of $4.33 for the same period compares with $3.12 a year ago.

For the current quarter, JPMorgan Chase & Co. is expected to post earnings of $3.82 per share, indicating a change of +7% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.2% over the last 30 days.

JPMorgan Chase & Co. has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.

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

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