Magazine article American Banker

Northern Trust Option Plan Spurs a Forecast Decrease

Magazine article American Banker

Northern Trust Option Plan Spurs a Forecast Decrease

Article excerpt

Goldman Sachs Group Inc. trimmed earnings estimates for Northern Trust Corp. after the company said expenses would hit its earnings next year.

Northern Trust said Monday in a filing with the Securities and Exchange Commission that the "vesting of stock options granted through June 30, 2005, is expected to increase pretax compensation expense for the fiscal year 2006 by approximately $5 million."

That will reduce 2006 earnings by about 2 cents a share, the filing said.

But on Tuesday, Goldman analyst Lori Appelbaum trimmed a nickel from her estimates for next year and for 2007. She now expects the Chicago company to earn to $2.80 a share in 2006 and $3.10 the following year, she wrote in a research note.

Ms. Appelbaum, who ratesthe company "in-line/neutral," explained her trims by noting that management has indicated to her that another 4 cents per share of employee options "are likely to be granted in January, bringing the total stock option expense to 6 cents per share" next year.

In its May quarterly filing with the SEC, Northern Trust said it would push back option expensing from the third quarter to Jan. 1, 2006, because of a rule change by the Financial Accounting Standards Board. FASB does not require companies to start expensing options until the first fiscal year after June 15, 2005.

Not all analysts are as concerned as Ms. Appelbaum about Northern Trust's stock option expensing.

Mark Fitzgibbon, an analyst at Sandler O'Neill & Partners LP, said in a phone interview that stock option expensing is something that will affect most companies and that it will not be a big issue for Northern Trust. …

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