Story updated at 10:05 a.m. to reflect market activity.
Northern Trust fell 1% to $63.51 in morning trading.
The bank's analysts said Northern Trust is expensive as an asset manager though it has less flexibility.
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Analysts Brennan Hawken and David Eads wrote "NTRS is current at the high end of the valuation range among asset managers, without the recent track record of earnings growth. Also, now that NTRS is subject to the CCAR process, it has less capital flexibility and higher regulatory / legal expenses due to its BHC status. Therefore, given these negatives plus the fact that NTRS trades at 18.5x NTM earnings, we believe there is more value in other names."
Separately, TheStreet Ratings team rates NORTHERN TRUST CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NORTHERN TRUST CORP (NTRS) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, increase in stock price during the past year and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 17.4%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NORTHERN TRUST CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, NORTHERN TRUST CORP increased its bottom line by earning $2.99 versus $2.81 in the prior year. This year, the market expects an improvement in earnings ($3.45 versus $2.99).
- The gross profit margin for NORTHERN TRUST CORP is currently very high, coming in at 94.76%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.45% trails the industry average.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Capital Markets industry average. The net income increased by 1.2% when compared to the same quarter one year prior, going from $167.70 million to $169.70 million.
- You can view the full analysis from the report here: NTRS Ratings Report