A month has gone by since the last earnings report for Morgan Stanley (MS Quick QuoteMS - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Morgan Stanley due for a breakout? 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 Q2 Earnings Beat on Robust IB & Trading

Morgan Stanley’s second-quarter 2024 earnings of $1.82 per share handily outpaced the Zacks Consensus Estimate of $1.65. The bottom line also compared favorably with $1.24 per share reported in the prior-year quarter.

Morgan Stanley’s IB business rebounded. Advisory fees surged 30% year over year. Further, underwriting fees witnessed solid momentum in the quarter. Specifically, equity underwriting income jumped 56% and fixed income underwriting income was up 71%. So, total IB fees (in the Institutional Securities division) grew 51% to $1.62 billion. We had projected it to be $1.24 billion.

The company also posted a solid trading performance. Equity trading revenues increased 18% year over year and fixed-income trading income was up 16%.

Lower provisions were another tailwind for Morgan Stanley.

However, despite a 24% increase in interest income, the company’s net interest income (NII) witnessed modest growth due to higher interest expenses. Also, an increase in total non-interest expenses was a headwind.

Further, weakness in the wealth management business was a drag.

Net income applicable to common shareholders (GAAP) was $2.94 billion, up 44% from the year-ago quarter. Our estimate for the metric was $2.26 billion.

Revenues Up, Expenses Rise

Quarterly net revenues were $15.02 billion, up 12% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $14.18 billion.

NII was $2.07 billion, up 3%. We had projected NII of $1.83 billion.

Total non-interest revenues of $12.95 billion increased 13%. Our estimate for the metric was $12.11 billion.

Total non-interest expenses were $10.87 billion, up 4%. Our estimate for the metric was $10.34 billion.

Provision for credit losses was $76 million, down 53% from the prior-year quarter.

Quarterly Segment Performance

Institutional Securities: Pre-tax income was $2.05 billion, jumping 109% from the prior-year quarter. Our estimate for the same was $1.5 billion.

Net revenues were $6.98 billion, up 23% year over year. The upside resulted from increased advisory fees, underwriting income and trading revenues. We had projected revenues of $6 billion.

Wealth Management: Pre-tax income totaled $1.82 billion, up 8% year over year. Our estimate for the metric was $1.89 billion.

Net revenues were $6.79 billion, up 2%, driven by higher asset management revenues and transactional revenues. We had projected revenues of $6.78 billion.

Total client assets were $5.69 trillion as of Jun 30, 2024, up 16% year over year. We had projected the metric to be $5.41 trillion.

Investment Management: Pre-tax income was $222 million, jumping 31% from the year-ago quarter. Our estimate for the same was $276. million.

Net revenues were $1.39 billion, up 8%. The improvement was largely attributable to a rise in asset management and related fees. We had projected revenues the same as the reported number.

As of Jun 30, 2024, total assets under management or supervision were $1.52 trillion, up 8% year over year. Our estimate for the metric was $1.5 trillion.

Capital Position Solid

As of Jun 30, 2024, the book value per share was $56.80, up from $55.24 in the corresponding period of 2023. The tangible book value per share was $42.30, up from $40.79 as of Jun 30, 2023.

Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.1% compared with 17.8% in the year-ago quarter. The common equity Tier 1 capital ratio was 15.3%, down from 15.8% a year ago.

Share Repurchase Update

In the reported quarter, Morgan Stanley repurchased 8 million shares for $750 million.

2024 Outlook

Management expects the IS segment NII to decline modestly in the third 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.

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?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Morgan Stanley has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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. Notably, Morgan Stanley has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.