Why Northern Trust Stock Tumbled by 5% on Tuesday

Before market open Tuesday, Northern Trust (NTRS -4.96%) released its first-quarter earnings report, which set the tone for its stock that day. Unfortunately, this meant quite a tough trading session for the company and its investors, as market players largely sold out of the shares. They fell by 5% in value, notably worse than the 0.2% dip experienced by the bellwether S&P 500 index.

A major double whiff

Northern Trust saw declines in both revenue and, particularly, net income in its first quarter. The former declined by 6% year over year to hit $1.65 billion, while the latter saw a far steeper (36%) drop to slightly under $215 million ($0.96 per share) according to generally accepted accounting principles (GAAP).

Both headline figures were significantly under the average analyst estimates. The consensus prognosticator forecast for revenue was $1.78 billion, and for per-share earnings, it was $1.45.

During the quarter, the Chicago-based financial services company saw a 6% uptick in non-interest expenses. Other line items affecting its performance included a more than $184 million pre-tax loss on debt securities due to what it characterized as a “repositioning” of its portfolio. On a brighter note, it did see 13% in total assets under management (AUM), a key metric for many companies of its type.

Management says frothy equity markets will provide support

Management waxed positive about Northern Trust’s trailing performance and immediate future, although its pronouncements didn’t seem to land with investors, given the sell-off. CEO Michael O’Grady pointed out that the company managed to grow its deposits and spoke of the robust equity markets that should help support the “improving momentum across our business.”