Morgan Stanley Hits 20-month High After Massive Q4 Beat

Morgan Stanley Hits 20-month High After Massive Q4 Beat
January 17, 2020

 

The shares of Morgan Stanley (NYSE: MS) surged yesterday with 6.61% or $3.50 to close at $56.44 after the financial institution reported fiscal 2019 fourth-quarter earnings that blew past analysts’ estimates. The stock also got a boost from the ambitious financial targets set forth by the company for the years to come.

The New York, US-based company, reported fourth-quarter revenues of $10.86 billion, up 27% from $8.55 billion in the comparable quarter last year. The Street had forecast revenues of $9.72 billion for the reported period.

Net income for the fourth-quarter increased sharply to $2.09 billion, or $1.30 per share, from $1.36 billion, or $0.80 per share, in the prior-year period.

The quarterly results include a one-time tax benefit of $158 million, or $0.10 per share. Notably, in the comparable period of fiscal 2018, the company recorded a one-time tax benefit of $111 million or $0.07 per share and severance costs of $172 million connected with an employee-related decision last month.

Excluding charges, adjusted earnings for 4Q 2019 were $1.20 per share, an increase from $0.73 per share in the year-ago period. On average, 18 analysts polled by Thomson Reuters anticipated the company to post earnings of $0.99 per share for the quarter.

James Gorman, CEO of Morgan Stanley, pointed out the impressive performance of all business divisions. Gorman said, “We delivered strong quarterly earnings across all of our businesses. Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full-year revenues and net income. This consistent performance met all of our stated performance targets.”

Segment-wise:

  • Institutional Securities division reported net revenues of $5.05 billion, up 32% from last year. Analysts surveyed by FactSet anticipated revenues of $4.46 billion. Bond trading assisted the Institutional Securities division to grow at an impressive rate. Specifically, Fixed Income trading generated revenues of $1.27 billion, surpassing analysts’ forecast of $933.50 million. Equity trading and investment banking revenue met analysts’ expectations of $1.92 billion and $1.58 billion, respectively.
  • Wealth Management revenues also increased by 11% to $4.58 billion. Wall Street analysts had anticipated revenues of $4.39 billion for the quarter.
  • Investment Management revenues almost doubled to $1.36 billion, from $684 million in the prior-year period. Notably, Morgan Stanley’s smallest division, i.e., investment management, caught the attention of analysts and the market with its exceptional performance. The division generated revenues of $1.36 billion, up more than 100% from last year, and surpassing the $783.20 million forecast by over half-a-billion dollars. Morgan Stanley has explained that the surge was because of a $670 million investment revenue (a 720% rise from an earlier year) on the interest carried from an Asian IPO.
  • At the end of the fourth quarter, the bank reported a return on tangible equity of 12.79%. The bank aims to increase it to between 13% and 15% in the next two years.
  • Likewise, Morgan Stanley intends to increase the pre-tax margin of wealth management division to a range of 28% to 30% by 2022. The bank also aims to achieve an efficiency ratio of between 70% and 72% during the same period. The company’s board of directors has approved a quarterly dividend of $0.35 per share, payable on February 14th, 2020.

The quarterly beat and impressive financial targets are anticipated to keep the stock bullish in the short-term.

The historical price chart indicates that the stock has broken the resistance at 50. Additionally, the stochastic oscillator is also in the bullish region. Therefore, we are anticipating the stock to move up in the short-term.

ms - technical analysis - 17th Jan 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.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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