Yahoo Finance Northern Trust (NTRS) to Report Q1 Earnings: What's in Store?
Northern Trust Corporation’s NTRS first-quarter 2023 results is scheduled to release on Apr 25, before market open. The company’s revenues are expected to have improved from the year-ago reported figure while the earnings are expected to have declined.
In the last reported quarter, NTRS’ earnings missed the Zacks Consensus Estimate. Results were adversely impacted by a rising expense base, worsening credit quality, lower fee income and weak capital ratios. Yet, a rise in net interest income (NII), driven by higher rates, acted as a tailwind.
Northern Trust has a disappointing earnings surprise history. Its earnings surpassed estimates in one of the trailing four quarters, and missed thrice, the negative surprise being 1.36%, on average.
Northern Trust Corporation Price and EPS Surprise
Northern Trust Corporation price-eps-surprise | Northern Trust Corporation Quote
NTRS’ activities in the to-be-reported quarter were inadequate to raise analysts’ optimism. As a result, the Zacks Consensus Estimate for first-quarter earnings of $1.51 per share has moved 2% downward in the past month. Moreover, the figure indicates a 14.69% decrease from the year-ago quarter’s reported number.
The Zacks Consensus Estimate for revenues is pegged at $1.76 billion, suggesting growth of 2.28% from the year-ago quarter’s reported figure.
Here are other factors that are expected to have impacted NTRS’ quarterly performance:
NII: The lending environment weakened during the quarter under review, with the pace of loan growth across most categories slowing down as the quarter progressed. Per the Fed’s latest data, commercial real estate loans, consumer loans, and commercial and industrial loan growth declined in the quarter under review. This was due to an uncertain economic environment owing to the collapse of the Silicon Valley Bank and heightening recession fears.
Hence, a lower level of loans is likely to have affected average interest-earning assets. Also, outflows are expected as depositors seek safer too-big-to-fail banks.
The Zacks Consensus Estimate of $131.9 billion for average interest-earning assets for the quarter indicates a 1.4% decline from the last reported figure.
Federal Reserve hiked rates by 50 basis points in the to-be-reported quarter and 25 bps in the prior quarter. The policy rate reached 4.75-5%, the highest since 2008. Such successive rate hikes have limited any further positive impact on the company’s NII.
Weakening lending scenario and lower-to-no-positive impact of higher rates is anticipated to have affected NII during the quarter.
The Zacks Consensus Estimate for NII is expected to have fallen 1.3% to $528 million sequentially.
Fee Income: Northern Trust uses a lag effect to calculate its custody and fund administration as well as investment management fees, i.e., computations are based on the prior-quarter end valuations.
The performance of equity markets was moderate in the fourth quarter. Hence, the muted market performance in the fourth quarter is likely to have hindered equity trading volumes and led to lower client activities. This is likely to have resulted in lower custody and fund administration, and investment management fees for NTRS in the first quarter.
Also, NTRS provides the majority of its asset-management services through its Asset Servicing unit, which generates a significant portion of total revenues. Due to a decline in the U.S. stock prices and global fixed income, asset servicing and asset management fees are likely to have faced headwinds.
The wealth management unit is likely to have been affected by a decline in equity market indices & fixed income values. This is anticipated to have affected fee income of the first quarter.
Nonetheless, the elimination of fee waiver and the ongoing creation of new businesses are positives for the fee income.
The Zacks Consensus Estimate for security commissions and trading income, pegged at $36.1 million, reflects a 2.8% rise sequentially.
The Zacks Consensus Estimate for total fee income is pegged at $1.23 billion, indicating a 25.3% rise from the prior quarter’s reported figure.
Expenses: NTRS’ investments in digital initiatives and technology are likely to have kept costs elevated in the quarter. These investments might aid the company over the long term, but the rising current expense level is anticipated to have curbed the bottom-line expansion in the first quarter. Costs are likely to have increased due to inflation and increased hiring.
What Does the Zacks Model Say?
The proven Zacks model does not conclusively predict an earnings beat for Northern Trust this time around. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Northern Trust has an Earnings ESP of 0.00%.
Zacks Rank: Northern Trust currently carries a Zacks Rank of 3.
Bank Stocks Worth a Look
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Independent Bank IBCP has an Earnings ESP of +1.40% and carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2023 results on Apr 27.
Over the past month, the Zacks Consensus Estimate for IBCP’s quarterly earnings has remained unrevised.
QCR Holdings QCRH has an Earnings ESP of +4.62% and a Zacks Rank #3 currently. The company is scheduled to release first-quarter 2023 earnings on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
QCRH’s quarterly earnings estimates have moved marginally downward over the past month.
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Northern Trust Corporation (NTRS) : Free Stock Analysis Report
QCR Holdings, Inc. (QCRH) : Free Stock Analysis Report
Independent Bank Corporation (IBCP) : Free Stock Analysis Report