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Morgan Stanley (MS) Up 11.6% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Morgan Stanley (MS - Free Report) . Shares have added about 11.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Morgan Stanley due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Morgan Stanley Q1 Earnings Beat as IB Business Rebounds
Morgan Stanley’s first-quarter 2024 earnings of $2.02 per share handily outpaced the Zacks Consensus Estimate of $1.69. The bottom line compared favorably with $1.70 per share reported in the prior-year quarter.
Though advisory fees declined 28% year over year, underwriting fees witnessed solid improvement in the quarter. Specifically, equity underwriting income jumped 113% and fixed income underwriting income was up 37%. So, total IB fees (in the Institutional Securities division) grew 16% to $1.45 billion. We had projected it to be $1.26 billion.
The company also posted a decent trading performance. Equity trading revenues increased 4% year over year, while fixed-income trading income declined 4%.
A provision benefit was another tailwind for Morgan Stanley.
However, despite a 30% increase in interest income, the company’s net interest income (NII) declined due to higher interest expenses. Also, an increase in total non-interest expenses was a headwind.
Net income applicable to common shareholders (GAAP) was $3.27 billion, up 15% from the year-ago quarter. Our estimate for the metric was $2.69 billion.
Revenues Improve, Expenses Rise
Quarterly net revenues were $15.14 billion, up 4% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $14.47 billion.
NII was $1.8 billion, down 23%. We had projected NII of $1.89 billion.
Total non-interest revenues of $13.34 billion increased 10%. Our estimate for the metric was $12.51 billion.
Total non-interest expenses were $10.74 billion, up 2%. Our estimate for expenses was $10.67 billion.
Provision for credit losses was a benefit of $6 million against a provision expense of $234 million in the prior-year quarter.
Quarterly Segment Performance
Institutional Securities: Pre-tax income was $2.35 billion, up 24% from the prior-year quarter. Our estimate for the same was $1.65 billion.
Net revenues were $7.02 billion, up 3% year over year. The upside resulted from increased underwriting revenues and equity trading revenues. We had projected revenues of $6.33 billion.
Wealth Management: Pre-tax income totaled $1.81 billion, up 5% year over year. Our estimate for this was the same as the reported number.
Net revenues were $6.88 billion, up 5%, driven by higher asset management revenues and transactional revenues. We had projected revenues of $6.82 billion.
Total client assets were $5.5 trillion as of Mar 31, 2024, up 21% year over year. We had projected the metric to be $5.03 trillion.
Investment Management: Pre-tax income was $241 million, jumping 45% from the year-ago quarter. Our estimate for the same was $241.5 million.
Net revenues were $1.38 billion, up 7%. The improvement is attributable to a rise in asset management and related fees. We had projected revenues of $1.4 billion.
As of Mar 31, 2024, total assets under management or supervision were $1.51 trillion, up 10% year over year. Our estimate for the metric was $1.47 trillion.
Capital Position Solid
As of Mar 31, 2024, the book value per share was $55.60, up from $55.13 in the corresponding period of 2022. The tangible book value per share was $41.07, up from $40.68 as of Mar 31, 2023.
Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.2% compared with 17.5% in the year-ago quarter. The common equity Tier 1 capital ratio was 15.3%, down from 15.6% a year ago.
Share Repurchase Update
In the reported quarter, Morgan Stanley repurchased 12 million shares for $1 billion.
2024 Outlook
Management expects the Institutional Securities segment NII to be relatively stable in the second quarter on a sequential basis.
Given the current macroeconomic headwinds, wealth management segment pre-tax margins are estimated to be in the mid-20% range.
The tax rate is expected to be almost 23%.
Long-Term Objectives
The company expects an ROTCE of 20% or more. The efficiency ratio is expected to be less than 70%.
For the WM segment, the pre-tax margin is projected at more than 30%. Across the WM and IM segments, total client assets are expected to be $10 trillion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Morgan Stanley has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Morgan Stanley has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Morgan Stanley belongs to the Zacks Financial - Investment Bank industry. Another stock from the same industry, Goldman Sachs (GS - Free Report) , has gained 15.4% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Goldman reported revenues of $14.21 billion in the last reported quarter, representing a year-over-year change of +16.3%. EPS of $11.58 for the same period compares with $8.79 a year ago.
Goldman is expected to post earnings of $8.86 per share for the current quarter, representing a year-over-year change of +187.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +6.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Goldman. Also, the stock has a VGM Score of F.
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Morgan Stanley (MS) Up 11.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Morgan Stanley (MS - Free Report) . Shares have added about 11.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Morgan Stanley due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Morgan Stanley Q1 Earnings Beat as IB Business Rebounds
Morgan Stanley’s first-quarter 2024 earnings of $2.02 per share handily outpaced the Zacks Consensus Estimate of $1.69. The bottom line compared favorably with $1.70 per share reported in the prior-year quarter.
Though advisory fees declined 28% year over year, underwriting fees witnessed solid improvement in the quarter. Specifically, equity underwriting income jumped 113% and fixed income underwriting income was up 37%. So, total IB fees (in the Institutional Securities division) grew 16% to $1.45 billion. We had projected it to be $1.26 billion.
The company also posted a decent trading performance. Equity trading revenues increased 4% year over year, while fixed-income trading income declined 4%.
A provision benefit was another tailwind for Morgan Stanley.
However, despite a 30% increase in interest income, the company’s net interest income (NII) declined due to higher interest expenses. Also, an increase in total non-interest expenses was a headwind.
Net income applicable to common shareholders (GAAP) was $3.27 billion, up 15% from the year-ago quarter. Our estimate for the metric was $2.69 billion.
Revenues Improve, Expenses Rise
Quarterly net revenues were $15.14 billion, up 4% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $14.47 billion.
NII was $1.8 billion, down 23%. We had projected NII of $1.89 billion.
Total non-interest revenues of $13.34 billion increased 10%. Our estimate for the metric was $12.51 billion.
Total non-interest expenses were $10.74 billion, up 2%. Our estimate for expenses was $10.67 billion.
Provision for credit losses was a benefit of $6 million against a provision expense of $234 million in the prior-year quarter.
Quarterly Segment Performance
Institutional Securities: Pre-tax income was $2.35 billion, up 24% from the prior-year quarter. Our estimate for the same was $1.65 billion.
Net revenues were $7.02 billion, up 3% year over year. The upside resulted from increased underwriting revenues and equity trading revenues. We had projected revenues of $6.33 billion.
Wealth Management: Pre-tax income totaled $1.81 billion, up 5% year over year. Our estimate for this was the same as the reported number.
Net revenues were $6.88 billion, up 5%, driven by higher asset management revenues and transactional revenues. We had projected revenues of $6.82 billion.
Total client assets were $5.5 trillion as of Mar 31, 2024, up 21% year over year. We had projected the metric to be $5.03 trillion.
Investment Management: Pre-tax income was $241 million, jumping 45% from the year-ago quarter. Our estimate for the same was $241.5 million.
Net revenues were $1.38 billion, up 7%. The improvement is attributable to a rise in asset management and related fees. We had projected revenues of $1.4 billion.
As of Mar 31, 2024, total assets under management or supervision were $1.51 trillion, up 10% year over year. Our estimate for the metric was $1.47 trillion.
Capital Position Solid
As of Mar 31, 2024, the book value per share was $55.60, up from $55.13 in the corresponding period of 2022. The tangible book value per share was $41.07, up from $40.68 as of Mar 31, 2023.
Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.2% compared with 17.5% in the year-ago quarter. The common equity Tier 1 capital ratio was 15.3%, down from 15.6% a year ago.
Share Repurchase Update
In the reported quarter, Morgan Stanley repurchased 12 million shares for $1 billion.
2024 Outlook
Management expects the Institutional Securities segment NII to be relatively stable in the second quarter on a sequential basis.
Given the current macroeconomic headwinds, wealth management segment pre-tax margins are estimated to be in the mid-20% range.
The tax rate is expected to be almost 23%.
Long-Term Objectives
The company expects an ROTCE of 20% or more. The efficiency ratio is expected to be less than 70%.
For the WM segment, the pre-tax margin is projected at more than 30%. Across the WM and IM segments, total client assets are expected to be $10 trillion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Morgan Stanley has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Morgan Stanley has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Morgan Stanley belongs to the Zacks Financial - Investment Bank industry. Another stock from the same industry, Goldman Sachs (GS - Free Report) , has gained 15.4% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Goldman reported revenues of $14.21 billion in the last reported quarter, representing a year-over-year change of +16.3%. EPS of $11.58 for the same period compares with $8.79 a year ago.
Goldman is expected to post earnings of $8.86 per share for the current quarter, representing a year-over-year change of +187.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +6.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Goldman. Also, the stock has a VGM Score of F.