Northern Trust (NTRS) To Report Q3 Earnings: What's In Store?

Northern Trust Corporation’s (NASDAQ:NTRS) third-quarter results, scheduled for Oct 23, are expected to reflect a year-over-year rise both in earnings and revenues.

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 strong in the third quarter, the company might have registered growth in custody, servicing and management fees.

Notably, the company provides majority of its asset-management services through the C&IS unit, which generates more than 50% of total revenues. A rise in revenues in this segment will boost the company’s overall revenues. Further, the Zacks Consensus Estimate of $1.52 billion for the to-be-reported quarter’s sales reflects a year-over-year rise of 2.8%.

Per the Zacks Consensus Estimate, the C&I segment’s custody and fund administration fees will likely flare up 1.3% sequentially to $390 million. Furthermore, investment management and securities lending revenues are projected to be up 1.8% and slightly sequentially, respectively.

Therefore, with steady performance of its components, total C&I trust, investment and other servicing fees will likely have escalated 1.8% sequentially to $559 million.

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

Our proven model does not likely predict an earnings beat for Northern Trust this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) depicts the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Northern Trust has an Earnings ESP of -1.14% and carries a Zacks Rank of 3, currently.

Here are the other factors that might have influenced the company’s quarterly performance:

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

Foreign Exchange Trading Revenues to Remain Low: Given the mix foreign exchange (“FX”) trading volatility with high in developing markets and low in emerging markets, along with mostly reduced volumes in the July-September quarter, the company’s revenues from FX trading might have remained low.

Net Interest Income (NII) Disappointing: A dismal lending scenario — mainly in the areas of commercial and industrial, and commercial real estate — during the third quarter is expected to have had an adverse impact on net interest income (NII), while decent consumer loan growth might have been an offsetting factor.

Further, the Fed’s accommodative-policy stance with decline in interest rates (two rate cuts — in July and September), flattening of the yield curve and steadily-rising deposit betas are likely to have hurt the bank’s net interest margin.

Notably, average earnings assets are likely to have increased, thus, favorably impacting the company’s NII. The consensus estimate of $107.1 billion reflects a 1.3% sequential rise in earning assets.

In addition, the company’s activities during the quarter under review were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $1.64 increased slightly over the last 30 days. The figure also reflects a year-over-year rise of 3.8%.

Stocks That Warrant a Look

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

BOK Financial Corporation (NASDAQ:BOKF) is set to release results on Oct 23. The company has an Earnings ESP of +1.50% and carries a Zacks Rank of 3, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cullen/Frost Bankers, Inc. (NYSE:CFR) is slated to release earnings on Oct 24. The company has an Earnings ESP of +0.07% and currently carries a Zacks Rank of 3.

Huntington Bancshares Incorporated (NASDAQ:HBAN) has an Earnings ESP of +0.60% and at present, holds a Zacks Rank of 3. It is scheduled to report quarterly figures on Oct 24.

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