Morgan Stanley (MS Quick QuoteMS - Free Report) is set to announce first-quarter 2025 earnings on April 11 before the opening bell. The company’s performance and the subsequent management conference call are expected to grab a lot of attention from analysts and investors amid Trump’s tariff plans and consequences.

Among Morgan Stanley’s close peers, JPMorgan (JPM Quick QuoteJPM - Free Report) is also slated to announce quarterly numbers on April 11, while Goldman Sachs (GS Quick QuoteGS - Free Report) will release results on April 14. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Morgan Stanley’s fourth-quarter performance was impressive, driven by solid investment banking (IB) and trading performance. This time, the company’s performance is likely to have been decent. The Zacks Consensus Estimate for first-quarter revenues of $16.63 billion suggests 9.9% year-over-year growth.

In the past seven days, the consensus estimate for earnings for the to-be-reported quarter has been revised 2.6% lower to $2.26. This indicates an 11.9% improvement from the prior-year quarter.

Estimate Revision Trend
 

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MS has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with the average beat being 21.03%.

Earnings Surprise History
 

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Factors to Impact Morgan Stanley’s Q1 Earnings

IB Income: Global mergers and acquisitions (M&As) in the first quarter of 2025 were less impressive than previously expected. While deal value and volume rose marginally during the quarter, this was majorly driven by the Asia Pacific region. The year started on an extremely positive note with the expectations of robust IB performance on the back of the Trump administration being business-friendly and the likelihood of tax cuts and deregulations. 

However, none of these materialized, and the M&A rebound failed to take hold as uncertainty over the tariff and the ensuing trade war resulted in extreme market volatility. These developments have led to economic ambiguity, with data indicating a slowdown in the U.S. economy and mounting inflationary pressure. Hence, amid such a backdrop, companies started rethinking their M&A plans despite stabilizing rates and having significant investible capital. Yet, Morgan Stanley’s position as one of the leading players in the space is likely to have supported advisory fees in the quarter.

The Zacks Consensus Estimate for advisory fees is pegged at $601.9 million, suggesting a year-over-year rise of 30.6%. Our estimate for the same is pinned at $642.9 million.

Also, the IPO market saw signs of cautious optimism, given the market volatility and geopolitical challenges. Further, the subdued equity market performance led to weak activity in follow-up equity issuances. Bond issuance volume was weak for similar reasons. Thus, growth in Morgan Stanley’s underwriting fees is expected to have been modest during the to-be-reported quarter. 

The consensus estimate for fixed-income underwriting fees is pegged at $560 million, indicating an almost 1% rise. The Zacks Consensus Estimate for equity underwriting fees of $444.7 million suggests an increase of 3.4%. The consensus estimate for total underwriting fees of $1 billion implies a rise of 1.9% from the year-ago quarter.

Our estimate for fixed-income underwriting fees is $615.4 million, whereas the same for equity underwriting fees is $470.9 million.

The Zacks Consensus Estimate for IB income of $1.31 billion indicates a year-over-year decline of 17.6%. Our estimate for IB income is pegged at $1.87 billion.

Trading Revenues: The performance of Morgan Stanley’s trading business (constituting a significant portion of its top line) is expected to have been decent in the first quarter of 2025, supported by increased client activity and market volatility.

In the to-be-reported quarter, the uncertainty over the impact of tariffs on the U.S. economy and the Fed’s monetary policy drove client activity as investors shifted to safe havens. Further, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, Morgan Stanley is likely to have recorded solid growth in trading revenues.

The Zacks Consensus Estimate for the company’s equity trading revenues is pegged at $3.23 billion, suggesting a rise of 13.6% from the prior-year quarter. The consensus estimate for fixed-income trading revenues of $2.61 billion indicates a growth of 5%.

Our estimates for first-quarter equity trading revenues and fixed-income trading revenues are $3.14 billion and $2.46 billion, respectively.

Net Interest Income (NII): In the first quarter, the Federal Reserve kept interest rates unchanged at 4.25-4.5%. This is likely to have offered some support to Morgan Stanley’s NII as the funding/deposit costs stabilized.   

Management expects the Wealth Management (WM) segment NII to be relatively stable sequentially.

The Zacks Consensus Estimate for the WM segment NII is pegged at $1.89 billion, suggesting a rise of 1.8% on a year-over-year basis. Our estimate for the segment NII is the same as the consensus estimate.

Expenses: Cost reduction, which has long been Morgan Stanley's primary strategy for remaining profitable, is unlikely to have provided any support in the March-ended quarter. As the company has been investing in franchises, overall costs are anticipated to have been elevated. 

We expect total non-interest expenses of $11.47 billion, implying a 6.7% year-over-year increase.

What Our Quantitative Model Unveils for MS

Per our proven model, the chances of Morgan Stanley beating the Zacks Consensus Estimate for earnings this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

The Earnings ESP for Morgan Stanley is +1.69%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

MS currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Morgan Stanley’s Price Performance & Valuation

In the first quarter, MS shares performance was weak. The stock performed worse than the Zacks Investment Bank industry, the S&P 500 Index and its close peers – JPMorgan and Goldman.

1Q25 MS Price Performance
 

Image Source: Zacks Investment Research

MS shares appear expensive relative to the industry. The stock is, at present, trading at the forward 12-month price/earnings (P/E) of 11.50X. This is above the industry’s 10.40X, reflecting a stretched valuation.

Price-to-Earnings F12M
 

Image Source: Zacks Investment Research

Also, MS stock is trading at a premium compared with JPMorgan and Goldman. At present, JPM has a forward P/E of 11.42X, while GS’ forward P/E is 9.96X.

How to Play Morgan Stanley Stock Now

Morgan Stanley continues to benefit from its long-standing partnership with Mitsubishi UFJ Financial Group. In 2023, the firms deepened their 15-year alliance by integrating parts of their Japanese brokerage operations, enhancing their combined equity research, sales and execution capabilities. These strategic moves are expected to strengthen Morgan Stanley’s foothold in the competitive Japanese market and further support its long-term profitability.

Additionally, Morgan Stanley has strategically shifted its focus away from capital markets as a primary income source, emphasizing wealth and asset management growth instead. This transition has been supported by key acquisitions, including Eaton Vance, E*Trade Financial and Shareworks. These have strengthened the company’s revenue diversification and enhanced its resilience across market cycles. As a result, the combined contribution of the Wealth and Investment Management divisions to net revenues surged from 26% in 2010 to more than 55% in 2024. 

Therefore, Morgan Stanley's balanced business approach provides stability and growth potential, even during the current volatile market conditions. As such, the company has a higher chance of easily navigating the challenging environment.

However, investors must check management comments regarding this year’s IB business prospects during the first-quarter 2025 conference call. Also, they should keep an eye on macroeconomic factors and policy matters likely to influence Morgan Stanley’s future performance. 

Those who already own MS stock can hold on to it because it is less likely to disappoint over the long term. However, those who intend to buy the stock should consider the above-mentioned factors carefully and evaluate their risk tolerance before investing.