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What to Expect from Northern Trust (NTRS) in Q3 Earnings?

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Northern Trust Corporation’s (NTRS - Free Report) third-quarter 2018 results, scheduled to be reported on Oct 17, are expected to reflect a year-over-year rise in earnings and revenues.

In the second quarter, the company surpassed Zacks Consensus Estimate on higher revenues. Also, total client assets exhibited growth. However, escalating operating expenses remained a major drag.

Northern Trust has a decent earnings surprise history, delivering positive earnings surprises in each of the trailing four quarters, with an average beat of 7.5%.

Northern Trust Corporation Price and EPS Surprise

However, activities of Northern Trust during the September quarter were inadequate to win analysts’ confidence. Thus, over the last seven days, its Zacks Consensus Estimate for the to-be-reported quarter’s earnings remained stable at $1.62. Nevertheless, the figure reflects a year-over-year improvement of 35%.

Also, the consensus estimate for sales of $1.51 billion indicates a 12.2% increase on a year-over-year basis.

Factors that might influence the company’s third-quarter performance:

Modest Rise in Net Interest Income (NII): Northern Trust’s interest income is expected to benefit from the expansion of margins due to higher interest rates. The Zacks Consensus Estimate projects an expansion of 22 basis points in net interest margin to 1.51%, year over year.

Also, average earnings assets are anticipated to increase, thus benefiting the company’s NII. The consensus estimate of $114.4 billion reflects a 1.7% year-over-year rise in earning assets.

C&I Trust, Investment and Other Servicing Fees Might Display Growth: Northern Trust uses a lag effect to calculate its corporate custody and investment management fees, i.e. the computations are based on the prior-quarter end valuations. Since the performance of equity markets was relatively better in the previous quarter, the company will likely be able to register growth in custody, servicing and management fees.

Per the Zacks Consensus Estimate, C&I segment’s custody and fund administration fees are likely to increase 12.7% year over year to $381 million. Also, investment management and securities lending revenues are projected to be up 9% and 8.6%, respectively.

With improvement in all components, total C&I trust, investment and other servicing fees are likely to rise 9.8% year over year to $550 million.

Controlled Expenses: With Northern Trust’s cost-saving initiatives underway, expenses in the quarter might have remained under control.

Let’s have a look at what our quantitative model predicts:

Our proven model doesn’t conclusively show that Northern Trust will be able to beat the Zacks Consensus Estimate this time around, as it does not have the right combination of two key ingredients. It should be noted that a stock with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better has significantly higher chances of beating estimates.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Earnings ESP: The Earnings ESP for Northern Trust is -0.97%.

Zacks Rank: Northern Trust currently has a Zacks Rank of 3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

Stocks to Consider

Here are a few finance stocks that you may want to consider, as these have the right combination of elements to post an earnings beat this quarter, according to our model.

BOK Financial Corp. (BOKF - Free Report) is slated to release results on Oct 24. The company has an Earnings ESP of +0.24% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cullen/Frost Bankers (CFR - Free Report) is set to report earnings results on Oct 25. It has an Earnings ESP of +0.54% and carries a Zacks Rank #3.

Ameriprise Financial (AMP - Free Report) is slated to release quarterly figures on Oct 23. It has an Earnings ESP of +4.30% and it currently carries a Zacks Rank #2.

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