BofA Securities has increased its price target for Northern Trust (NASDAQ: NASDAQ:NTRS) shares to $115 from $103, while maintaining a Buy rating on the stock.
The adjustment follows Northern Trust's third-quarter 2024 results, which surpassed expectations. The company reported a core earnings per share (EPS) of $2.01, significantly outperforming the BofA and consensus estimates of $1.68 and $1.76, respectively.
This beat was attributed primarily to a much stronger net interest income (NII), which came in at $569 million, compared to the forecasted $535 million and $534 million.
The management of Northern Trust credited the higher NII to an improved deposit mix, robust growth, and the stabilization of non-interest bearing deposits.
Looking ahead to the fourth quarter of 2024, the company provided guidance for NII to be between $550 million and $560 million, indicating the balance sheet remains asset sensitive.
Additionally, they forecast a quarter-over-quarter expense growth of about 2%, which implies a full-year 2024 estimated expense growth of 6.1% year-over-year.
Based on these outcomes, BofA Securities has revised its fourth-quarter 2024 and full-year 2025 EPS estimates for Northern Trust to $1.92 and $7.58, respectively. The new price target of $115 is driven by these EPS revisions and an updated valuation methodology, which now equally weights the fiscal years 2025 and 2026 estimates, instead of focusing solely on 2025.
The firm has applied price-to-earnings (P/E) multiples of 16.5x and 16.0x, and price-to-tangible book value (P/TBV) multiples of 1.7x and 1.6x, which have been adjusted from the previous 16.6x P/E and 1.4x P/TBV multiples.
Northern Trust's stock is currently trading at 13.6 times the projected 2025 earnings, which is below the 16.5 times five-year pre-pandemic median. The company's price to year-end 2025 estimated tangible book value is 1.7 times, aligning with BofA's forecast for a return on tangible common equity of approximately 14% for fiscal years 2025 and 2026.
BofA Securities projects an EPS growth of 2.3% and 13% year-over-year for 2025 and 2026, respectively, and reiterates its Buy rating for Northern Trust.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.