Back to top

Image: Bigstock

Here's Why You Should Hold Northern Trust (NTRS) Stock Now

Read MoreHide Full Article

Northern Trust Corporation’s (NTRS - Free Report) efforts to bolster wealth management operations, continues to boost its growth prospects. Also, the bank’s robust organic growth is a tailwind. However, rising operating expenses and declining loan balance remain near-term woes for the company.

The bank has been focused on initiating business over the last few years in order to tackle macroeconomic headwinds. Further, its innovative technology-driven hedge fund administration capabilities brought to the marketplace via Northern Trust Hedge Fund Services clearly provides an attractive proposition to clients.

Northern Trust’s capital deployment also looks impressive. The company had increased its quarterly dividend by 17% in July 2019. Notably, the debt/equity ratio compares favorably with that of the broader industry, highlighting the fact that such dividend hikes are sustainable in the future.

Further, organic growth remains a key strength at Northern Trust, as reflected by its revenue growth trajectory. Revenues grew at a five-year (2016-2020) CAGR of 5.3%, on rising non-interest as well as net interest income. Thus, the company seems well positioned to maintain this rising trend.

On the flip side, despite the successful implementation of expense-reduction initiatives, costs escalated on investments in technology as well as increasing compensation and equipment and software expenses. Notably, non-interest expenses rose at a five-year (2016-2020) CAGR of 5.8%. We believe that the rise in expenses might impede bottom-line growth.

Moreover, pressure on net interest income due to the decline in loan balance is a major concern for Northern Trust. Though loans and leases escalated in 2020, in the last four years (ended 2019), it witnessed a negative CAGR of 2.4%. Given the lack of confidence and uncertainties related to pandemic prevailing in the markets, further decline in loans might impact its top-line expansion.

Shares of this Zacks Rank #3 (Hold) company have rallied 26.3% over the past six months, underperforming the industry’s growth of 49.5%. Notably analysts seem to have an optimistic stance on the stock. The Zacks Consensus Estimate for both 2021 and 2022 earnings has moved marginally upward over the past 30 days.

Stocks to Consider

MR. COOPER GROUP INC (COOP - Free Report) has recorded an upward earnings estimate revision of 48% for 2021 earnings over the past 30 days. Currently, it sports a Zacks Rank #1(Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

ServisFirst Bancshares, Inc. (SFBS - Free Report) has witnessed a marginal upward earnings estimate revision for ongoing-year earnings in 30 days’ time. At present, it sports a Zacks Rank of 1.

Enova International, Inc. (ENVA - Free Report) has witnessed upward revisions of 4.7% over the past 30 days in current-year earnings estimates. The stock currently carries a Zacks Rank #2 (Buy).

5G Revolution: 3 Stocks to Make Your Move

With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.

Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .

  • Smartest stock for 5G telecom
     
  • Safest investment in 5G hardware
     
  • Single best 5G buy of all!

Download now. Today the report is FREE >>

Published in