Earnings beat in store for Northern Trust (NTRS) in first quarter?

Northern Trust CompanyNTRS results for the first quarter of 2022 are expected to be released on April 26 before the market opens. Although profits are expected to decline from the figure reported a year ago, revenues are expected to increase.

In the most recently reported quarter, NTRS earnings exceeded Zacks’ consensus estimate for higher revenue, helped by an increase in fee income and net interest income (“NII”). Most credit metrics showed significant improvements, while net interest margin (“NIM”) decreased and expense base increased.

Northern Trust boasts an impressive history of earnings surprises. Its earnings have exceeded estimates in the past four quarters, with the surprise being 6.5% on average.

Northern Trust Corporation Award and EPS Surprise

Northern Trust Corporation price-eps-surprise | Quote from the Northern Trust Company

NTRS’ activities in the quarter to report were enough to spark optimism among analysts. As a result, Zacks consensus estimate for first-quarter earnings of $1.66 has risen 1.2% over the past month. However, the figure indicates a 2.4% drop from the figure reported a year ago. Still, the consensus revenue estimate is pegged at $1.69 billion, suggesting 6.7% growth from the figure published a year ago.

Here are other factors that may have impacted NTRS’ quarterly performance:

TIN: The ongoing economic expansion should have supported the credit environment during the quarter under review. According to the latest data from the Fed, demand for loans, particularly commercial and industrial loans, consumer loans and home loans, improved in the first quarter of 2022 compared to the end of the fourth quarter. Against this backdrop, NTRS likely saw decent loan growth in the March quarter.

A strong lending pipeline is expected to have driven organic growth in the corporate and institutional services (C&IS) and wealth management segments during the quarter. Therefore, a higher level of lending will likely boost average interest-earning assets. Zacks consensus estimate of $150.8 million for average interest-earning assets for the quarter indicates a 1.3% improvement over the last published figure

In March, the Federal Reserve raised short-term interest rates. The positive impact of the rate hike could be gradually reflected over the following quarters.

Nevertheless, the improvement in the lending scenario should have supported the NIM and the NII. This, combined with higher average interest earning assets, is likely to have boosted NTRS’ NII. The Zacks consensus estimate for NII is expected to have risen 1.7% to $367 million, sequentially.

Fee receipts: Northern Trust uses a lag effect to calculate its custodial and investment management fees, ie the calculations are based on the previous quarter end valuations. Equity market performance was volatile in the fourth quarter. Consequently, a surge in equity trading volumes and increased client activity may have recorded gains for NTRS in custody, service and management fees during the first quarter.

NTRS provides the majority of its asset management services through the C&IS unit, which generates over 50% of total revenue. An increase in revenue in this segment should have provided some support to Northern Trust’s overall revenue in the reporting quarter.

Zacks’ consensus estimate for C&I segment trust, investment and other service fees was 1.1% growth from the prior quarter’s reported figure of $632 million.

Zacks’ consensus estimate for security fees and trading revenue, as well as cash management fees, set at $36.8 million and $10.9 million, respectively, is expected to have increased by 2 .5% and 2.6%, sequentially.

Expenses: NTRS’ investments in digital initiatives and technology may have kept costs high in the quarter. These investments could help the company in the long term, but the increased level of current expenses may have dampened the expansion of results in the first quarter. Costs may also have increased due to inflation and competitive labor markets.

What does the Zacks model say?

Zacks’ proven model predicts an earnings beatdown for Northern Trust this time around. Indeed, NTRS has the right combination of two key ingredients – a positive win ESP and Zacks rank #3 (Hold) or higher – to increase the chances of a win beat.

You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.

ESP Earnings: Northern Trust has an ESP on earnings of +0.06%.

Zack’s Ranking: Northern Trust currently carries a Zacks rank of 3.

Other actions worth a look

Associate Bancorp SBA and Independent banking company IBCP are a few banking stocks you may want to consider as they have the right combination of elements to post a pace of earnings in their next releases, according to our model.

The earnings ESP for ASB is +0.81% and the company currently has a Zacks Rank #2 (Buy). ASB is expected to release its first quarter 2022 results on April 21. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks consensus estimate for ASB’s first-quarter earnings has held steady over the past month.

The IBCP is expected to publish its first quarter results on April 26. The IBCP currently has a #2 Zacks ranking and +10% ESP gain.

The Zacks consensus estimate for IBCP’s first quarter earnings has been flat for the past 30 days.

Stay on top of upcoming earnings announcements with Zacks Earnings Calendar.

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