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Morgan Stanley (MS) Q1 Earnings Miss on Coronavirus Mayhem
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Morgan Stanley’s (MS - Free Report) first-quarter 2020 adjusted earnings of 99 cents per share missed the Zacks Consensus Estimate of $1.07. Also, the figure declined 26% from the year-ago quarter. The results were largely impacted by coronavirus-related concerns and economic slowdown.
Shares of the company lost almost 2% in early market trading. The stock’s price performance after the full day’s trading will give a better picture.
As expected, Morgan Stanley recorded a 11% year-over-year decline in advisory fees. Equity underwriting fees inched down 1%, while fixed income underwriting revenues grew 10% from the prior-year quarter. Therefore, investment banking fees fell 1% from the year-ago quarter.
As projected, its trading revenues registered growth. Specifically, fixed income trading revenues increased 29% and equity trading income improved 20% from the prior-year period. Overall trading revenues increased 30% from the year-ago period.
Higher net interest income, driven by a rise in loan balance (up 15%) and lower interest expenses, supported the top line to some extent.
Net income applicable to common shareholders during the quarter was $1.60 billion, decreasing 32% from a year ago.
Lower Advisory Fees Hurt Revenues, Costs Stable
Net revenues were $9.49 billion, down 8% from the prior-year quarter. However, the top line beat the Zacks Consensus Estimate of $9.08 billion.
Net interest income was $1.36 billion, jumping 34% from the year-ago quarter. This was largely due to 34% fall in interest expenses.
Total non-interest revenues of $8.13 billion declined 12% year over year.
Total non-interest expenses were $7.34 billion, on par with the prior-year reported number.
Dismal Segmental Performance
Institutional Securities: Pre-tax income from continuing operations was $950 million, decreasing 40% year over year. Net revenues were $4.91 billion, down 6% from the prior-year figure. The fall was mainly due to lower investment banking revenues and loss in investment revenues, partially offset by higher trading income.
Wealth Management: Pre-tax income from continuing operations totaled $1.06 billion, down 11% from the year-ago figure. Net revenues were $4.04 billion, declining 8% year over year, as fall in transactional revenues and net interest income were partially offset by higher asset management revenues.
Investment Management: Pre-tax income from continuing operations was $143 million, falling 18% from the year-ago quarter. Net revenues were $692 million, down 14% from the prior-year level. The decrease was mainly owing to lower investment revenues, partially offset by a rise in asset management fees.
As of Mar 31, 2020, total assets under management or supervision were $584 billion, up 22% on a year-over-year basis.
Strong Capital Position
As of Mar 31, 2020, book value per share was $49.09, up from $42.83 in the corresponding period of 2019. Tangible book value per share was $43.28, up from $37.62 in the comparable year-ago period.
Morgan Stanley’s Tier 1 capital ratio was 17.4% compared with 19.0% in the year-ago quarter. Tier 1 common equity ratio was 15.3%, down from 16.7% in the prior year.
Share Repurchase Update
During the first quarter, Morgan Stanley repurchased shares worth $1.3 billion. This was part of the company's 2019 capital plan. Notably, in mid-March, the company suspended the buyback plan amid coronavirus pandemic.
Our Viewpoint
Morgan Stanley’s focus on less capital-incentive operations like wealth management is commendable. However, coronavirus-related concerns and economic slowdown are expected to continue hurting the company’s financials in the near term.
Bank of America’s (BAC - Free Report) first-quarter 2020 earnings of 40 cents per share missed the Zacks Consensus Estimate of 42 cents. This was attributed to reserve build of $3.6 billion for coronavirus-related crisis.
JPMorgan’s (JPM - Free Report) first-quarter 2020 earnings came in at 78 cents per share, which missed the Zacks Consensus Estimate of $1.70, thanks to a substantial rise in provisions owing to coronavirus-related concerns.
Goldman Sachs (GS - Free Report) reported first-quarter 2020 earnings per share of $3.11, surpassing the Zacks Consensus Estimate of $2.83. However, the bottom line compared unfavorably with earnings of $5.71 per share recorded in the year-earlier quarter.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Morgan Stanley (MS) Q1 Earnings Miss on Coronavirus Mayhem
Morgan Stanley’s (MS - Free Report) first-quarter 2020 adjusted earnings of 99 cents per share missed the Zacks Consensus Estimate of $1.07. Also, the figure declined 26% from the year-ago quarter. The results were largely impacted by coronavirus-related concerns and economic slowdown.
Shares of the company lost almost 2% in early market trading. The stock’s price performance after the full day’s trading will give a better picture.
As expected, Morgan Stanley recorded a 11% year-over-year decline in advisory fees. Equity underwriting fees inched down 1%, while fixed income underwriting revenues grew 10% from the prior-year quarter. Therefore, investment banking fees fell 1% from the year-ago quarter.
As projected, its trading revenues registered growth. Specifically, fixed income trading revenues increased 29% and equity trading income improved 20% from the prior-year period. Overall trading revenues increased 30% from the year-ago period.
Higher net interest income, driven by a rise in loan balance (up 15%) and lower interest expenses, supported the top line to some extent.
Net income applicable to common shareholders during the quarter was $1.60 billion, decreasing 32% from a year ago.
Lower Advisory Fees Hurt Revenues, Costs Stable
Net revenues were $9.49 billion, down 8% from the prior-year quarter. However, the top line beat the Zacks Consensus Estimate of $9.08 billion.
Net interest income was $1.36 billion, jumping 34% from the year-ago quarter. This was largely due to 34% fall in interest expenses.
Total non-interest revenues of $8.13 billion declined 12% year over year.
Total non-interest expenses were $7.34 billion, on par with the prior-year reported number.
Dismal Segmental Performance
Institutional Securities: Pre-tax income from continuing operations was $950 million, decreasing 40% year over year. Net revenues were $4.91 billion, down 6% from the prior-year figure. The fall was mainly due to lower investment banking revenues and loss in investment revenues, partially offset by higher trading income.
Wealth Management: Pre-tax income from continuing operations totaled $1.06 billion, down 11% from the year-ago figure. Net revenues were $4.04 billion, declining 8% year over year, as fall in transactional revenues and net interest income were partially offset by higher asset management revenues.
Investment Management: Pre-tax income from continuing operations was $143 million, falling 18% from the year-ago quarter. Net revenues were $692 million, down 14% from the prior-year level. The decrease was mainly owing to lower investment revenues, partially offset by a rise in asset management fees.
As of Mar 31, 2020, total assets under management or supervision were $584 billion, up 22% on a year-over-year basis.
Strong Capital Position
As of Mar 31, 2020, book value per share was $49.09, up from $42.83 in the corresponding period of 2019. Tangible book value per share was $43.28, up from $37.62 in the comparable year-ago period.
Morgan Stanley’s Tier 1 capital ratio was 17.4% compared with 19.0% in the year-ago quarter. Tier 1 common equity ratio was 15.3%, down from 16.7% in the prior year.
Share Repurchase Update
During the first quarter, Morgan Stanley repurchased shares worth $1.3 billion. This was part of the company's 2019 capital plan. Notably, in mid-March, the company suspended the buyback plan amid coronavirus pandemic.
Our Viewpoint
Morgan Stanley’s focus on less capital-incentive operations like wealth management is commendable. However, coronavirus-related concerns and economic slowdown are expected to continue hurting the company’s financials in the near term.
Morgan Stanley Price, Consensus and EPS Surprise
Morgan Stanley price-consensus-eps-surprise-chart | Morgan Stanley Quote
Currently, Morgan Stanley carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Big Banks
Bank of America’s (BAC - Free Report) first-quarter 2020 earnings of 40 cents per share missed the Zacks Consensus Estimate of 42 cents. This was attributed to reserve build of $3.6 billion for coronavirus-related crisis.
JPMorgan’s (JPM - Free Report) first-quarter 2020 earnings came in at 78 cents per share, which missed the Zacks Consensus Estimate of $1.70, thanks to a substantial rise in provisions owing to coronavirus-related concerns.
Goldman Sachs (GS - Free Report) reported first-quarter 2020 earnings per share of $3.11, surpassing the Zacks Consensus Estimate of $2.83. However, the bottom line compared unfavorably with earnings of $5.71 per share recorded in the year-earlier quarter.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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