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Can High Revenues Aid Northern Trust (NTRS) Earnings Beat? - Analyst Blog

We expect Northern Trust CorporationNTRS to beat earnings expectations when it reports second-quarter 2015 results before the opening bell on Wednesday, Jul 22.

Why a Likely Positive Surprise?

Our proven model shows that Northern Trust has the right combination of two key ingredients to beat earnings.

Positive Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.04%. This is a very meaningful and leading indicator of a likely positive earnings surprise for the company.

Zacks Rank #3 (Hold) : Northern Trust carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Northern Trust's Zacks Rank #3 and ESP of +1.04% makes us confident of an earnings beat on Jul 22.

Factors to Influence Q2 Results

Northern Trust continues to invest in new business in order to augment revenue growth, which is lagging due to low interest rates and operating leverage challenges amid the difficult economic environment.

The top line should benefit from new business activity in the second quarter as well. Trust, Investment and Other Servicing Fees, constituting a major source of non-interest income, relates to assets under management, custody and service. We believe improving markets coupled with new business should drive such fee income.

Further, management expects seasonally higher securities lending revenue in the quarter, stemming from the international dividend season.

Additionally, we believe quarterly results are likely to reflect reducing expenses. This is because increase in certain expenses including compensation, business promotion and marketing costs owing to seasonality in the first quarter is not likely to be repeated in the second quarter. Also, an improving trend in the provision for credit losses remains an encouraging trait, which should boost the bottom-line growth in the quarter.

However, we observe that the company's operating environment has been significantly impacted by the persistent low net interest scenario. Given the absence of any steady turnaround in the second quarter, net interest income is expected to remain under pressure.

Also, we believe Northern Trust's top line is likely to be impacted by lower trading revenues as the quarter witnessed weak activity.

Activities of Northern Trust during the quarter were inadequate to win analysts' confidence. As a result, the Zacks Consensus Estimate for the quarter declined marginally to 96 cents per share over the last seven days.

Stocks That Warrant a Look

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

The earnings ESP for Interactive Brokers Group, Inc. IBKR is +12.50% and it carries a Zacks Rank #2. The company is expected to release results on Jul 21.

Huntington Bancshares Incorporated HBAN has an earnings ESP of +5.00% and holds a Zacks Rank #2. It is scheduled to report results on Jul 23.

The earnings ESP for American Capital, Ltd. ACAS is +26.09% and it carries a Zacks Rank #1. The company is scheduled to release results on Aug 5.

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HUNTINGTON BANC (HBAN): Free Stock Analysis Report

NORTHERN TRUST (NTRS): Free Stock Analysis Report

INTERACTIVE BRK (IBKR): Free Stock Analysis Report

AMER CAP LTD (ACAS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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