Raymond James Upgrades Northern Trust To Strong Buy, Likes Wealth Management And Global Custody

• Shares of Northern Trust Corporation NTRS have declined almost 10 percent in the past three months, touching a low of $65.25 on August 25.
• David J. Long of Raymond James has upgraded the rating from Outperform to Strong Buy, while lowering the price target from $85 to $83.
• Long believes that the current valuation offers an attractive opportunity for investors to own a “well-diversified, high-quality, large-cap financial institution” with robust growth prospects.

Analyst David Long expects investors “to become increasingly attracted to Northern’s growth opportunities in both of its two core businesses,” wealth management and global custody. Both businesses are expected to see robust revenue growth opportunities due to favorable global secular trends.

“Of the custody banks, we believe Northern can produce the strongest top-line growth given its smaller size, attractive competitive positioning, and personal wealth management leadership,” the Raymond James report stated.

Northern Trust has also been focused on improving its expenses to trust fees ratio, with expenses totaling 107 percent of trust fees in Q2, down from 129 percent in 2011. Long expects the company to be able to reach the 100 percent level in 2017.

The EPS estimates for 2015 and 2016 have been reduced due to Raymond James’ forecasts being pushed back “for increases in the Fed Funds rate and recent weakness in the equity markets.”