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Morgan Stanley Poised for Bottom-Line Growth: Time to Hold?


Trades from $3

Recently, we issued an updated research report on Morgan Stanley (MS - Analyst Report) . The company’s bottom-line growth seems encouraging, given its various strategic initiatives. However, trading income distress may continue due to macroeconomic headwinds.

Over the past few years, Morgan Stanley has undertaken various strategic initiatives to improve profitability, which is commendable. The company streamlined its operations in order to lower balance-sheet risks and focus on two less capital intensive businesses – Wealth Management and Investment Management. Also, it had launched a company-wide cost control plan – Project Streamline – to reduce infrastructure expenses by 2017.

Further, Morgan Stanley’s strong capital position supports enhanced capital deployment activities. Notably, in June, the company received conditional approval for its 2016 capital plan, subject to resubmission by Dec 2016. Also, in July, it announced a 33% hike in quarterly dividend and authorized $3.5 billion of share repurchases for the four quarters beginning third-quarter 2016.

However, Morgan Stanley’s trading revenue is continuously under stress due to a low level of client activity in its business segments. Also, the company is about to restructure its trading business due to which a turnaround in situation is not expected.

Further, the company has been facing new regulatory requirements and intense pricing competition in some of its businesses in the recent years which will keep its financials under pressure.

Shares of Morgan Stanley have gained approximately 36.6% in the past six months.

Over the past 60 days, the Zacks Consensus Estimate has been relatively stable at $2.54 per share for 2016 and is down 2.6% to $2.95 per share for 2017.

Currently, Morgan Stanley carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked stocks in the finance space include Yintech Investment Holdings Limited (YIN - Snapshot Report) , The Charles Schwab Corporation (SCHW - Analyst Report) and Nomura Holdings, Inc. (NMR - Snapshot Report) .

Yintech Holdings currently sports a Zacks Rank #1 (Strong Buy). Over the past 60 days, its Zacks Consensus Estimate has been revised 32.1% upward. Its share price has increased 24.2% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Charles Schwab carries a Zacks Rank #2 (Buy). It has witnessed an upward earnings estimate revision of 0.8% over the past 60 days, while its share price is up 28.4% in the past three months.

Nomura Holdings witnessed an upward earnings estimate revision of 32.1% over the past 60 days. Its share price has risen 32.6% in the past three months. It also carries a Zacks Rank #2.

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