Morgan Stanley Beats Estimates as Trading Division Excels

Morgan Stanley Beats Estimates as Trading Division Excels
October 16, 2020

 

The US-headquartered multinational investment bank Morgan Stanley (NYSE: MS) reported fiscal 2020 third-quarter profit that rose 26% on a y-o-y basis. Revenues grew 16% from last year as all business divisions performed well. Both earnings and revenues surpassed Wall Street estimates. Following the results, the stock closed at $51.33, up $1.34% or $0.68 from the prior close.

The New York-based company reported third-quarter revenues of $11.657 billion, an increase from $10.032 billion from last year. Economists had anticipated the company to post revenues of $10.64 billion for the quarter.

For the quarter ended September 30th, the company recorded a net income of $2.597 billion, or $1.66 per share, a decrease from $2.06 billion, or $1.27 per share in the prior-year quarter.

Excluding the “intermittent net discrete tax benefits” of $113 million (or $0.07 per share), Morgan Stanley posted adjusted earnings of $1.59 per share, compared with $1.21 per share in the year-ago quarter.

Analysts polled by Thomson Reuters anticipated the company to post earnings of $1.28 per share for the quarter.

Morgan Stanley Chairman and CEO James Gorman expressed his happiness about the robust results: “We delivered strong quarterly earnings as markets remained active through the summer months, and our balanced business model continued to deliver consistent, high returns.”  

Segment-wise,

  • Institutional Securities posted Q3 revenues of $6.062 billion, compared with $5.023 billion last year. Specifically, investment banking revenues increased 11% y-o-y to $1.707 billion. Sales and trading revenues were $4.154 billion, up 20% on a y-o-y basis. Under the sales and trading division, equity revenues of $2.262 billion exceeded analysts’ estimate of $2.19 billion. Likewise, fixed income revenues of $1.924 billion surpassed the Consensus estimate of $1.59 billion.
  • Wealth management revenues increased to $4.657 billion, from $4.358 billion, mirroring robust fees and a considerable increase in lending and deposits. Analysts polled by FactSet had anticipated revenues of $4.45 billion. In particular, asset management revenues increased from $154 million to $2.793 billion.
  • Investment management revenues were $1.056 billion, an increase of 38% from the earlier year, led by historically high asset management fees and Assets Under Management (AUM). The FactSet analysts estimate was $856 million. Asset management revenues were $795 million, an increase of $131 million on a y-o-y basis.

During the third quarter, Morgan Stanley had set aside $111 million for credit losses on loans and lending commitments, an increase from $51 million in the year-ago quarter. The company’s Board of Directors has endorsed a quarterly dividend of $0.35 per share, payable on November 13th, 2020. At the end of the third quarter, the company’s Tier 1 capital standardized ratio was 17.3%. Also, the company’s pre-tax profit margin increased 3% y-o-y to 30%.

Looking forward, Gorman said, “The completion of the E*TRADE acquisition, the subsequent ratings upgrade from Moody’s, and the recently announced acquisition of Eaton Vance significantly strengthen our Firm and position us well for future growth.”

The quarterly earnings beat is expected to turn the stock bullish in the short-term.

Technically, the stock has broken the resistance at 48. The next minor resistance is anticipated only near 55. Furthermore, the MACD indicator has a positive reading. Therefore, we are expecting the stock to rally in the days ahead.

ms - technical analysis - 16th October 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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