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Northern Trust (NTRS) Up 4.6% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Northern Trust Corporation (NTRS - Free Report) . Shares have added about 4.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Northern Trust Q4 Earnings Lag, Expenses Rise
Northern Trust’s fourth-quarter 2016 earnings per share of $1.11 lagged the Zacks Consensus Estimate of $1.14. However, the reported figure compared favorably with $0.99 in the year-ago quarter.
Escalating operating expenses was a concern. However, top-line growth was a favorable factor. Further, the quarter witnessed a rise in assets under custody as well assets under management.
Net income came in at $266.5 million, up 11% from the prior-year quarter.
For full-year 2016, net income was $1.03 billion or $4.32 per share, compared with $973.8 million or $3.99 per share in the prior year. The Zacks Consensus Estimate was $4.29.
Top Line Grows; Costs Flare Up
For full-year 2016, revenues on a fully taxable equivalent basis, were $4.99 billion, up 5% from $4.73 billion in 2015. Moreover, results surpassed the Zacks Consensus Estimate of $4.92 billion.
Total revenue of $1.25 billion missed the Zacks Consensus Estimate of $1.26 billion. However, the reported figure was up 7% year over year.
On a fully taxable equivalent basis, net interest income of $329.3 million was up 11% year over year. This was driven by increased levels of average earning assets.
Net interest margin (NIM) was 1.20%, up 9 basis points from the prior-year quarter. The increase chiefly reflected higher yields on earning assets.
Non-interest income rose 6% from the year-ago quarter to $917.1 million. Rise in trust, investment and other servicing fees, higher foreign exchange trading income, along with rise in security commissions and trading income, were the primary reasons for this increase.
Non-interest expenses were up 6% year over year to $873.9 million in the quarter. The rise was mainly stemmed by an elevation in all components of expenses.
Improvement in Assets Under Management and Custody
As of Dec 31, 2016, Northern Trust’s total assets under custody increased 11% year over year to $6.72 trillion, while total assets under management rose 8% to $942.4 billion.
Credit Quality: A Mixed Bag
Total allowance for credit losses were $192 million, down 18% year over year. Further, non-performing assets declined 12.2% year over year to $165.4 million as of Dec 31, 2016.
However, net charge-offs were $10.9 million, up from $2.9 million from the year-ago quarter figure. Also, credit provision was $22.0 million in the quarter, while it was $18.5 million in the prior-year quarter.
Strong Capital Position
Under the Advanced Approach, as of Dec 31, 2016, Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 13.7%, 15.1% and 8.0% respectively, each exceeding the regulatory requirements.
During 2016, Northern Trust repurchased 6.05 million shares for $411.2 million at an average price of $67.91 per share. Notably, during the reported quarter, the company repurchased 0.8 million shares for $65.1 million at an average price of $79.10 per share.
How Have Estimates Been Moving Since Then?
Following the release, there has been one revision higher for the current quarter compared to one lower.
At this time, Northern Trust's stock has a poor score of 'F' both on growth and momentum front. Following the exact same course, the stock was allocated also a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Northern Trust (NTRS) Up 4.6% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Northern Trust Corporation (NTRS - Free Report) . Shares have added about 4.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Northern Trust Q4 Earnings Lag, Expenses Rise
Northern Trust’s fourth-quarter 2016 earnings per share of $1.11 lagged the Zacks Consensus Estimate of $1.14. However, the reported figure compared favorably with $0.99 in the year-ago quarter.
Escalating operating expenses was a concern. However, top-line growth was a favorable factor. Further, the quarter witnessed a rise in assets under custody as well assets under management.
Net income came in at $266.5 million, up 11% from the prior-year quarter.
For full-year 2016, net income was $1.03 billion or $4.32 per share, compared with $973.8 million or $3.99 per share in the prior year. The Zacks Consensus Estimate was $4.29.
Top Line Grows; Costs Flare Up
For full-year 2016, revenues on a fully taxable equivalent basis, were $4.99 billion, up 5% from $4.73 billion in 2015. Moreover, results surpassed the Zacks Consensus Estimate of $4.92 billion.
Total revenue of $1.25 billion missed the Zacks Consensus Estimate of $1.26 billion. However, the reported figure was up 7% year over year.
On a fully taxable equivalent basis, net interest income of $329.3 million was up 11% year over year. This was driven by increased levels of average earning assets.
Net interest margin (NIM) was 1.20%, up 9 basis points from the prior-year quarter. The increase chiefly reflected higher yields on earning assets.
Non-interest income rose 6% from the year-ago quarter to $917.1 million. Rise in trust, investment and other servicing fees, higher foreign exchange trading income, along with rise in security commissions and trading income, were the primary reasons for this increase.
Non-interest expenses were up 6% year over year to $873.9 million in the quarter. The rise was mainly stemmed by an elevation in all components of expenses.
Improvement in Assets Under Management and Custody
As of Dec 31, 2016, Northern Trust’s total assets under custody increased 11% year over year to $6.72 trillion, while total assets under management rose 8% to $942.4 billion.
Credit Quality: A Mixed Bag
Total allowance for credit losses were $192 million, down 18% year over year. Further, non-performing assets declined 12.2% year over year to $165.4 million as of Dec 31, 2016.
However, net charge-offs were $10.9 million, up from $2.9 million from the year-ago quarter figure. Also, credit provision was $22.0 million in the quarter, while it was $18.5 million in the prior-year quarter.
Strong Capital Position
Under the Advanced Approach, as of Dec 31, 2016, Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 13.7%, 15.1% and 8.0% respectively, each exceeding the regulatory requirements.
During 2016, Northern Trust repurchased 6.05 million shares for $411.2 million at an average price of $67.91 per share. Notably, during the reported quarter, the company repurchased 0.8 million shares for $65.1 million at an average price of $79.10 per share.
How Have Estimates Been Moving Since Then?
Following the release, there has been one revision higher for the current quarter compared to one lower.
Northern Trust Corporation Price and Consensus
Northern Trust Corporation Price and Consensus | Northern Trust Corporation Quote
VGM Scores
At this time, Northern Trust's stock has a poor score of 'F' both on growth and momentum front. Following the exact same course, the stock was allocated also a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.