Northern Trust Corporation (NTRS) is scheduled to report its second-quarter 2014 results on Jul 16.
The company has missed estimates in the trailing 4 quarters. In the first quarter, earnings per share came in at 75 cents, lagging the Zacks Consensus Estimate by 3 cents. Higher expenses primarily impacted the results.
Is Northern Trust likely to miss this quarter as well? Let’s see how things have shaped up for this announcement.
Factors to Influence Q2 Results
Low short-term interest rates coupled with persistent narrow spreads at the short end of the yield curve impacted Northern Trust’s net interest income (NII) and money market mutual fund fees over the last few quarters. Further, we observed that the company has experienced a declining trend in net interest margin (NIM) since 2009 and has not been able to reverse the trend in the recent quarters. Given the absence of any significant turnaround in the second quarter, NII and NIM is expected to remain under pressure.
Another headwind that might affect Northern Trust’s financials is expenses. Though the company has expense management initiatives in place, it is still facing challenges in controlling expenses owing to higher compliance costs.
However, Northern Trust has some encouraging traits that may favorably support its results. These include its continued growth in non-interest income and a declining provision for credit losses. Trust, Investment and Other Servicing Fees, constituting a major source of non-interest income, pertains to assets under management, custody and service. Given a favorable equity and asset market backdrop, we expect these fees to drive revenue growth this quarter as well.
Activities of Northern Trust during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 84 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Northern Trust is likely to beat the Zacks Consensus Estimate in the second quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Earnings ESP: The Earnings ESP for PNC Financial is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 84 cents.
Zacks Rank: Northern Trust’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks That Warrant a Look
Here are some other stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Fifth Third Bancorp (FITB) has an earnings ESP of +4.44% and carries a Zacks Rank #3. It is scheduled to report its second-quarter results on Jul 17.
Capital One Financial Corporation (COF) has an earnings ESP of +1.12% and carries a Zacks Rank #2. It is expected to report its second-quarter results on Jul 17.
Regions Financial Corporation (RF) has an earnings ESP of +4.76% and carries a Zacks Rank #3. It is scheduled to report its second-quarter results on Jul 22.
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