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Morgan Stanley (MS) Restates Q4 Earnings on U.S. Tax Reform

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On further clarification of the U.S. Tax Cuts and Jobs Act that was enacted in late December 2017, Morgan Stanley (MS - Free Report) announced revised earnings for fourth-quarter and full-year 2017 in its latest annual filing.

Revision of certain estimates related to the net discrete tax provision on account of the tax reform led to a $43 million increase in the provision for income taxes. In January 2018, it had reported provisions of $4.1 billion for 2017.

Further, segment wise, provision for income taxes was raised $89 million for Wealth Management while Institutional Securities witnessed a $45 million decline. Also, Investment Management unit’s provisions were reduced $1 million.

Moreover, Morgan Stanley restated full-year 2017 net income available to common shareholders of $6.1 million or $3.07 per share, down from $6.2 billion or $3.09 per share, previously reported. Also, for the fourth-quarter 2017, earnings per share were reduced 3 cents.

Further, the company expects effective tax rate from continuing operations to be in the range of 22-25% in 2018.

The tax reform is likely to improve loan demand in the economy and lend support to companies’ bottom line in the coming years. However, large one-time charges made a significant impact on 2017 results of many companies.

Morgan Stanley’s solid capital position keeps it well poised for growth. Also, initiatives to offload its non-core assets to lower balance-sheet risks and shift focus on less capital-incentive operations like wealth management are commendable. Moreover, its efforts to reduce expenses are likely to continue lending support to the bottom line.

Shares of Morgan Stanley have gained nearly 21.1% in a year, outperforming 19.4% growth of the industry it belongs to.

The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other stocks in the same space worth considering are Evercore (EVR - Free Report) , Raymond James Financial (RJF - Free Report) and The Charles Schwab Corporation (SCHW - Free Report) , each carrying a Zacks Rank of 2.

The Zacks Consensus Estimate for Evercore has been revised 12.5% upward for the current year in the last 60 days. The company’s share price has increased 16.2% in the past year.

Raymond James has witnessed 9.5% upward earnings estimate revision for 2018 in the last 60 days. Its share price has soared 15.7% in the past year.

Charles Schwab’s shares have gained 25.1% in a year. Its earnings estimates for 2018 have moved up 19.4% in the last 60 days.

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