CFRA has adjusted its outlook on Northern Trust (NASDAQ: NASDAQ:NTRS), increasing the stock's price target to $107 from $95. The firm has maintained a Hold rating on the shares.
The revision reflects a new price-to-earnings (P/E) ratio target of 14.5 times CFRA's 2025 earnings estimate, which aligns closely with the historic three-year average P/E ratio of 14.8 times.
The upgrade in the price target was accompanied by an increase in the earnings per share (EPS) estimates for the upcoming years. For 2024, the EPS forecast was lifted by $0.50 to $9.40, and for 2025, it was raised by $0.35 to $7.40. Northern Trust has seen a positive financial performance, attributed to higher market values in customer accounts. This growth has led to an increase in trust income and other servicing fees.
In terms of revenue, Northern Trust reported a 14% year-over-year increase, reaching $2.0 billion. Net interest income, which constitutes 29% of the total revenue, rose by 21% compared to the previous year. Trust, investment, and other service fees saw a 7% increase, while forex trading income grew by 9%, reflecting heightened client activity. However, the bank did report investment losses totaling $189 million.
Assets under Northern Trust's management have shown significant growth. Client assets under custody administration reached $17.4 trillion, marking a 23% increase year-over-year, while assets under custody climbed 25% to $13.8 trillion. Assets under management also grew by 22%, reaching $1.6 trillion, largely due to favorable equity market conditions.
The return on average common equity for Northern Trust improved to 15.4%, up from 11.6% a year ago. The third quarter of 2024 saw the bank return $453 million to shareholders, which included $152 million in dividends and $301 million in stock repurchases.
In other recent news, Northern Trust reported a substantial 42% increase in its third-quarter profit, primarily attributed to a rise in fee income from servicing and managing client assets. The firm's investment and other servicing fees grew by 8% to $1.2 billion compared to the same period last year, and its assets under custody or administration surged by 23% to $17.42 trillion. Northern Trust's net interest income (NII) rose by 21% to $569.4 million for the quarter ending September, and the net income reported was $464.9 million, or $2.22 per share, an increase from $327.8 million, or $1.49 per share, a year earlier.
The company's Q3 earnings per share of $2.22 surpassed analyst expectations of $1.74, and the revenue for the quarter came in at $1.98 billion, exceeding the estimated $1.93 billion. Furthermore, Northern Trust announced a quarterly cash dividend of $0.75 per share on its common stock, payable in early 2025.
InvestingPro Insights
Northern Trust's recent performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 14.2 is consistent with CFRA's target of 14.5, supporting the Hold rating. InvestingPro data shows a revenue growth of 12.39% over the last twelve months, corroborating the article's mention of increased trust income and servicing fees.
Two relevant InvestingPro Tips highlight Northern Trust's strengths: the company has maintained dividend payments for 54 consecutive years, underscoring its financial stability, and it's trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.43. These factors support the positive outlook presented in the article.
For investors seeking a deeper understanding of Northern Trust's potential, InvestingPro offers 6 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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