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Northern Trust (NTRS) Down 3.6% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Northern Trust Corporation (NTRS - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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 catalysts.
Riding on higher revenues, Northern Trust reported a positive earnings surprise of 1.9% in first-quarter 2017. Earnings per share came in at $1.09, beating the Zacks Consensus Estimate of $1.07. Further, the reported figure compared favorably with $1.03 recorded in the year-ago quarter.
Better-than-expected results were stemmed by top-line growth and credit provisions. In addition, the quarter witnessed a rise in assets under custody as well assets under management. However, escalating operating expenses were a concern.
Net income came in at $276.1 million, up 13% from the prior-year quarter.
Top Line Grows, Costs Escalate
Total revenue of $1.29 billion surpassed the Zacks Consensus Estimate of $1.28 billion. Moreover, the reported figure was up 8% year over year.
On a fully taxable equivalent basis, net interest income of $362.4 million was up 15% year over year. This was driven by increased levels of average earning assets and higher net interest margin.
Net interest margin (NIM) was 1.35%, up 14 basis points from the prior-year quarter. The increase chiefly reflected higher short-term interest rates and reduced premium amortization.
Non-interest income rose 6% from the year-ago quarter to $930.9 million. Rise in trust, investment and other servicing fees, along with rise in security commissions and trading income, and other operating income were the primary reasons for this increase. These positives were partially offset by reduced foreign exchange trading income and lower treasury management fees.
Non-interest expenses were up 8% year over year to $894.5 million in the quarter. The rise was mainly driven by an elevation in mostly all components of expenses.
Improvement in Assets Under Management and Custody
As of Mar 31, 2017, Northern Trust’s total assets under custody increased 14% year over year to $7.11 trillion, while total assets under management rose 11% to $1.0 trillion.
Credit Quality: A Mixed Bag
Total allowance for credit losses came in at $189 million, down 19% year over year. Net charge-offs were $2 million, down 25.9% from the year-ago quarter figure. Also, credit provision was $1.0 million in the quarter compared with provision of $2.0 million in the prior-year quarter.
However, non-performing assets increased 7.1% year over year to $186.8 million as of Mar 31, 2017.
Strong Capital Position
Under the Advanced Approach, as of Mar 31, 2017, Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 14.2%, 15.6% and 8.2% respectively, each exceeding the regulatory requirements.
During first-quarter 2017, Northern Trust repurchased 0.8 million shares for $70.1 million at an average price of $86.39 per share. This includes shares related to share-based compensation.
Outlook
Performance stock unit expense attributable to retirement-eligible employees is recognized from the date of the grant through the end of a requisite service period, which ends on Jun 30, 2017. The performance stock unit expense attributable to 2017 grants to retirement-eligible employees is expected to be $8 million in second-quarter 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three upward revisions for the current quarter.
At this time, Northern Trust's stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% 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.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Northern Trust (NTRS) Down 3.6% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Northern Trust Corporation (NTRS - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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 catalysts.
Northern Trust Q1 Earnings Beat, Expenses Escalate
Riding on higher revenues, Northern Trust reported a positive earnings surprise of 1.9% in first-quarter 2017. Earnings per share came in at $1.09, beating the Zacks Consensus Estimate of $1.07. Further, the reported figure compared favorably with $1.03 recorded in the year-ago quarter.
Better-than-expected results were stemmed by top-line growth and credit provisions. In addition, the quarter witnessed a rise in assets under custody as well assets under management. However, escalating operating expenses were a concern.
Net income came in at $276.1 million, up 13% from the prior-year quarter.
Top Line Grows, Costs Escalate
Total revenue of $1.29 billion surpassed the Zacks Consensus Estimate of $1.28 billion. Moreover, the reported figure was up 8% year over year.
On a fully taxable equivalent basis, net interest income of $362.4 million was up 15% year over year. This was driven by increased levels of average earning assets and higher net interest margin.
Net interest margin (NIM) was 1.35%, up 14 basis points from the prior-year quarter. The increase chiefly reflected higher short-term interest rates and reduced premium amortization.
Non-interest income rose 6% from the year-ago quarter to $930.9 million. Rise in trust, investment and other servicing fees, along with rise in security commissions and trading income, and other operating income were the primary reasons for this increase. These positives were partially offset by reduced foreign exchange trading income and lower treasury management fees.
Non-interest expenses were up 8% year over year to $894.5 million in the quarter. The rise was mainly driven by an elevation in mostly all components of expenses.
Improvement in Assets Under Management and Custody
As of Mar 31, 2017, Northern Trust’s total assets under custody increased 14% year over year to $7.11 trillion, while total assets under management rose 11% to $1.0 trillion.
Credit Quality: A Mixed Bag
Total allowance for credit losses came in at $189 million, down 19% year over year. Net charge-offs were $2 million, down 25.9% from the year-ago quarter figure. Also, credit provision was $1.0 million in the quarter compared with provision of $2.0 million in the prior-year quarter.
However, non-performing assets increased 7.1% year over year to $186.8 million as of Mar 31, 2017.
Strong Capital Position
Under the Advanced Approach, as of Mar 31, 2017, Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio were 14.2%, 15.6% and 8.2% respectively, each exceeding the regulatory requirements.
During first-quarter 2017, Northern Trust repurchased 0.8 million shares for $70.1 million at an average price of $86.39 per share. This includes shares related to share-based compensation.
Outlook
Performance stock unit expense attributable to retirement-eligible employees is recognized from the date of the grant through the end of a requisite service period, which ends on Jun 30, 2017. The performance stock unit expense attributable to 2017 grants to retirement-eligible employees is expected to be $8 million in second-quarter 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three upward revisions for the current quarter.
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 Growth Score of 'F', a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% 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.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.