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Is it Wise to Add Northern Trust (NTRS) to Your Portfolio

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Northern Trust Corporation (NTRS - Free Report) can be a solid bet now, backed 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.

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 costs escalated on ongoing investments in technology, driving compensation and equipment and software expenses for Northern Trust, 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 $131.4 billion in assets as of Sep 30, 2017, this Zacks Rank #2 (Buy) company’s strengths include strong top-line growth, consistent earnings growth and steady capital deployment activities.

6 Reasons Why Northern Trust is an Attractive Pick  

Revenue Growth: Northern Trust’s revenues reflected compounded annual growth rate (“CAGR”) of 6.2% over the last five years (2012-2016), with the increasing trend continuing in the first nine months of 2017. The solid top-line growth was backed by the continued addition of new business, and institutional clients and assets, along with rising net interest income.

The company’s projected sales growth (F1/F0) of 8.32% (as against the industry average of about 5.98%) indicates constant upward momentum in revenues.

Earnings Per Share Strength: Northern Trust’s earnings per share witnessed a CAGR of 11.4% over the last five years (2012-2016).

The earnings are expected to display an upswing in the near term as the company’s projected EPS growth (F1/F0) is 8.43%. Also, the company recorded an average positive earnings surprise of 0.39%, over the trailing four quarters.

Strong Leverage: Northern Trust’s debt/equity ratio is valued at 0.37 compared to the industry average of 0.88, 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 12.33%, as compared with the industry average of 10.29%, reflects the company’s commendable position over its peers. Notably, ROE is within the company’s target between 10% and 15%.

Steady Capital Deployment: Northern Trust displayed its capital strength as it successfully cleared the 2017 Dodd-Frank Act Stress Test (DFAST). Pursuant to this, in July 2017, the company increased its quarterly common stock dividend to 42 cents per share, up 10.5%, effective in third-quarter 2017. The capital plan also includes repurchase of up to $750 million of common stock between July 2017 and June 2018.

Share Price Movement: Northern Trust’s shares have gained 10.7% year to date compared with 18.1% growth recorded by the industry.



Bottom Line

Organic growth remains a key strength at Northern Trust, while cost-control efforts are likely to 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.

Other Stocks to Consider

Federated Investors, Inc. has been witnessing upward estimate revisions for the past 60 days. In six months’ time, the company’s share price has been up more than 30%. It sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enterprise Financial Services Corporation (EFSC - Free Report) has been witnessing upward estimate revisions for the last two months. Additionally, the stock moved up more than 10% over the past six months. It currently carries a Zacks Rank of 2.

Artisan Partners Asset Management Inc. (APAM - Free Report) has been witnessing upward estimate revisions for the past month. Also, the company’s shares have risen nearly 35% in six months’ time. It also holds a Zacks Rank of 2, at present.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

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