Northern Trust Corporation NTRS is scheduled to report second-quarter 2017 results tomorrow, before the opening bell. While revenues and earnings are expected to grow year over year, we can’t conclusively predict a likely earnings beat.

Before we discuss why an earnings beat might not be in store and what could influence the results, let’s take a look at how the company performed in the last quarter.   

The Chicago, IL-based company’s first-quarter 2017 earnings outpaced the Zacks Consensus Estimate owing to a rise in revenues. However, this was partly offset by escalating expenses.

Notably, this positive performance resulted in an appreciation of the company’s share price.  In the second quarter, the stock gained around 12.3%. Also, the Zacks Consensus Estimate remained unchanged over the last 30 days.

Moreover, Northern Trust has a decent earnings surprise history, as evident from the chart below:

Northern Trust Corporation Price and EPS Surprise

Northern Trust Corporation Price and EPS Surprise | Northern Trust Corporation Quote

Will the upcoming earnings release give a boost to Northern Trust’s stock? This depends largely on whether the firm is able to post a beat in the second quarter. However, our quantitative model doesn’t conclusively point toward an earnings beat this time. Here’s why:

Northern Trust doesn’t have the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) – for increasing its chances of an earnings beat. It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Zacks ESP:The Earnings ESP for Northern Trust is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.24. This is a major indicator of a likely positive earnings surprise for the company. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Northern Trust’s Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Factors to Influence Q2 Results

Trust Revenues to Witness Improvement: The equity markets across the globe displayed a decent improvement in the second quarter. Both the MSCI EAFE Index (measuring international equity performance) and the S&P 500 Index gained.

Notably, Northern Trust uses a lag effect to calculate its corporate custody and investment management fees, i.e. the computations are based on the prior quarter-end valuations. Since the performance of equity markets were relatively decent in the first quarter, the company will likely be able to record growth in custody, servicing and management fees.

Modest Rise in Net Interest Income (NII): Given the effect of rise in interest rates, Northern Trust should have recorded an increase in NII. However, a slowdown in loan growth during the quarter will have a marginal adverse impact on interest income.

Foreign Exchange Trading Revenues to Fall: Given the decrease in foreign exchange (“FX”) trading volatility, as well as mixed volumes in the second quarter, the company’s revenues from FX trading are likely to have deteriorated during the quarter on lower transactions.

Marginal Increase in Expenses: Despite some cost-saving initiatives, Northern Trust’s continued investments in new business activities may lead to a slight rise in expenses.

Stocks That Warrant a Look

Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Old National Bancorp ONB has an Earnings ESP of +3.70% and a Zacks Rank #2. It is scheduled to report second-quarter 2017 results on Jul 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Bancshares Incorporated HBAN has an Earnings ESP of +4.35% and a Zacks Rank #3. It is slated to report second-quarter results on Jul 21.

Fifth Third Bancorp FITB has an earnings ESP of +2.38% and a Zacks Rank #3. It is slated to report second-quarter results on Jul 21.

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