On Friday, Keefe, Bruyette & Woods analyst David Konrad increased the price target on Northern Trust stock (NASDAQ:NTRS) to $122 from $113, while maintaining a Market Perform rating. Konrad noted Northern Trust had a strong operating beat, with revenues surpassing strong expense growth. This performance was attributed to better-than-expected net interest income (NII) and fee income, coupled with lower expenses and a recovery of credit losses. The company's financial strength is reflected in its "GOOD" overall health rating from InvestingPro, which offers comprehensive analysis through its Pro Research Report, one of 1,400+ detailed company assessments available to subscribers.
The analyst highlighted that Northern Trust's management is anticipating low-single-digit NII growth for 2025, which is ahead of the consensus. Konrad also pointed out the positive trend in the expense-to-trust fee ratio, which declined to 113% in the quarter, signaling efficient cost management relative to income from trust fees.
Despite these positive indicators, Konrad expressed caution, suggesting that without a very strong market, it might be difficult for Northern Trust to significantly improve the expense-to-trust fee ratio in 2025. This is due in part to the impact of a strong dollar and the company's guidance for expenses to increase by 5% or below.
The report also compared Northern Trust's stock performance with the Bank Index (BKX), noting that Northern Trust's stock outperformed the BKX by approximately 140 basis points over the quarter. While trading at 13.7 times earnings, InvestingPro analysis suggests the stock is currently undervalued, with additional ProTips highlighting its 55-year history of consistent dividend payments and favorable P/E ratio relative to near-term earnings growth. The firm's return on tangible common equity (ROTCE) was cited as below-peer at 13.9%, compared to the peer average of 16.5%.
In other recent news, Northern Trust Corporation has been highlighted for its strong third quarter results, which demonstrated a net income of $465 million and earnings per share of $2.22. Key factors included a rise in Trust fees, particularly in Wealth Management, which saw a 9% increase, and assets under management reaching a record $444 billion, marking a 20% year-over-year increase. This performance led to a return of $453 million to shareholders through dividends and stock repurchases.
Analysts have responded to these developments, with Truist Securities assigning a Hold rating and a price target of $110.00, while RBC Capital Markets, Evercore ISI, and BofA Securities raised their price targets based on the robust earnings performance. BofA Securities and Evercore ISI have revised their EPS estimates for Northern Trust's fourth quarter 2024 and full-year 2025 to $1.92 and $7.58 respectively.
Despite the positive performance, Northern Trust is grappling with persistent expense issues. However, management is actively working to address this, demonstrating a commitment to operational efficiency and strategic investment for future growth. These recent developments highlight Northern Trust's ability to navigate a complex market environment while delivering value to shareholders and clients.
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