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7 Reasons to Add Northern Trust (NTRS) to Your Portfolio

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With sturdy wealth management operations with diversified products and services, Northern Trust Corporation (NTRS - Free Report) can be a solid bet now. The company’s focus on initiating new business to tackle macroeconomic headwinds and consistent addition of institutional clients and assets, along with favorable equity markets is expected to yield positive results for the stock.

Further, the recent interest rate hike is likely to bring further stability to top-line generation, which creates a buying opportunity for long-term horses. Though increasing risk and compliance requirements remain a concern for Northern Trust, given the strictly regulated nature of banking operations, management is taking steps to tackle expense growth and reinstate operating leverage. This, in turn, is anticipated to make the growth path smoother.

Therefore, it’s a good idea to add stocks with robust fundamentals and long-term growth opportunities to your portfolio, at the current level.

With $120.1 billion in assets as of Sep 30, 2016, Northern Trust’s strengths include strong top-line growth, consistent earnings growth and steady capital deployment activities.

7 Reasons Why Northern Trust Is a Must Buy  

Revenue Growth: Northern Trust’s revenues reflected compounded annual growth rate (“CAGR”) of 3.9% over the last five years (2011–2015). The solid top-line growth was backed by the consistent addition of new business, and institutional clients and assets.

The company’s projected sales growth (F1/F0) of 4.5% (as against the industry average of about 4.1%) indicates constant upward momentum in revenues.

Earnings Per Share Strength: Northern Trust’s earnings per share recorded a CAGR of 12.7% over the last five years (2011–2015).

The earnings are expected to show an upswing in the near term as the company’s projected EPS growth (F1/F0) is 9.9% compared to the industry average rate of 4.0%. Also, the company recorded an average positive earnings surprise of 4.0%, over the trailing four quarters.

Strong Leverage: Northern Trust’s debt/equity ratio is valued at 0.37 compared to the industry average of 0.90, indicating lower debt burden relative to the industry. It highlights the financial stability of the company even in an unstable economic environment.

Superior Return on Equity (ROE): Northern Trust’s ROE of 10.7%, as compared with the industry average of 8.7%, reflects the company’s commendable position over its peers. Notably, ROE is within the company’s target between 10% and 15%.

Favorable Zacks Rank: Northern Trust currently carries a Zacks Rank #2 (Buy). This has been driven by the upward estimate revisions, over the last 60 days. For 2015 and 2016, the Zacks Consensus Estimate moved up around 1% to $4.27 and $4.62 per share, respectively.

Steady Capital Deployment: Northern Trust remains focused on managing capital levels efficiently. This is well evident from the approval of the 2016 Capital Plan. Following the Federal Reserve’s approval, in Jul 2016, the company increased its quarterly common stock dividend by 9.1%. The capital plan also included a share repurchase program of up to $275 million, starting Jul 2016 through Jun 2017. Such capital deployment activities are anticipated to boost investors’ confidence.

Share Price Movement: Northern Trust’s shares have gained 25.1% year to date, compared with a 19.5% growth in the Zacks categorized Banks-Major Regional industry.



Bottom Line

Organic growth remains a key strength at Northern Trust, while cost-control efforts should support bottom-line growth.

Moreover, the ongoing investment in integrated global operating and technology platform has allowed Northern Trust to meet the growing and diversifying needs of institutional clients, which also covers a broad range of initiatives to benefit clients and future prospects in the coming years.

Stocks to Consider

Comerica Inc. (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Further, the stock has surged over 65.9% so far, this year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KeyCorp (KEY - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 42.4% so far, this year. It currently sports a Zacks Rank #1.

The Bank of New York Mellon Corp. (BK - Free Report) has been witnessing upward estimate revisions for the last 60 days. So far this year, the company’s share price has been up more than 19.3%. It carries a Zacks Rank #2.

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