Northern Trust's Strong Earnings Momentum Suggests a Q1 2025 Beat—Why Investors Should Buy Ahead of the Report

Northern Trust (NTRS) is poised to deliver another earnings beat ahead of its April 22, 2025, report, supported by a consistent streak of outperformance, positive analyst sentiment, and favorable industry dynamics. Let's dissect the data to understand why this regional banking giant could be a compelling buy ahead of the announcement.

Historical Earnings Surprises: A Consistent Outperformer

Over the past five quarters, Northern Trust has demonstrated remarkable resilience, consistently surpassing earnings expectations. Key highlights include:
- Q4 2024 Earnings Surprise: Delivered EPS of $2.26 vs. the $2.02 consensus, a 11.88% beat, with revenues of $1.96B, exceeding estimates by 1.58%.
- Q3 2024: Beat EPS estimates by 13.29%, marking the fourth consecutive quarter of EPS outperformance.
- Long-Term Trend: The average earnings surprise over the last four quarters was +7.29%, with zero misses.

This pattern suggests management's ability to execute even in challenging environments. For instance, despite a 8.9% year-over-year decline in net interest income (NII) in late 2023, fee-based revenue and assets under custody (AUC) growth have acted as critical stabilizers.

Zacks Earnings ESP: Analysts Are Bullish

The Zacks Earnings ESP (Expected Surprise Prediction) for NTRS currently stands at +3.84%, signaling analysts' confidence in another beat. This metric, which aggregates analyst revisions, is particularly compelling because stocks with a positive ESP and a Zacks Rank of #3 or better have a 70% historical success rate in beating estimates.

While NTRS holds a neutral Zacks Rank #3 (Hold), its industry—the Banks - Major Regional sector—is ranked in the top 14% of all Zacks industries. This sectoral strength, driven by rising fee income and robust asset management growth, bodes well for NTRS's performance.

Market Drivers: Fee Income and Asset Growth

Northern Trust's strategy has increasingly leaned on fee-based revenue, which grew 4.6% year-over-year in late 2023, and assets under custody/administration (AUC/AUM), which surged 124% to $11.92 trillion as of December 2023. These metrics are critical because they insulate the bank from NII volatility.

Additionally, the broader regional banking sector has outperformed the S&P 500 in 2024, with NTRS itself up 4.8% year-to-date as of the latest data. This resilience is partly due to strong demand for wealth management services and corporate trust offerings, areas where Northern Trust dominates.

The Upcoming Q1 2025 Report: What to Expect

Analysts currently project Q1 2025 EPS of $1.85 and revenues of $1.98B. Given the historical trend and the +3.84% ESP, there's a high likelihood of a beat, even if smaller than prior quarters. Key catalysts to watch:
1. Fee Income Growth: Trust and investment servicing fees could continue to outpace expectations.
2. AUC/AUM Expansion: A sustained rise in assets under management (AUM) could drive recurring revenue.
3. Cost Management: The bank has emphasized operational efficiency, which may improve margins despite macroeconomic headwinds.

Risks to Consider

• Net Interest Margin Pressure: Declines in NII remain a concern, though fee income has offset this.
• Credit Quality: Rising provisions for loan losses could weigh on results, though they've stabilized recently.

Investment Recommendation

Northern Trust's strong earnings momentum, favorable analyst sentiment, and exposure to a high-performing banking sector make it a compelling buy ahead of the April 22 report. The stock's $108.68 average price target (with a high of $131.70) suggests upside potential, even if the Q1 beat is modest.

Investors should consider purchasing NTRS shares ahead of the report, with a $105–$110 entry range, targeting a $120–$125 price target if the beat materializes. The Zacks ESP and historical data provide a solid foundation for optimism, making this a strategic call for income-focused investors.

In conclusion, Northern Trust's track record, coupled with its sector's momentum, positions it as a top pick for those looking to capitalize on a potential earnings surprise. The April report could be the catalyst to push shares higher in 2025.