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Surge in IB Activities & Solid Trading to Support MS' Q4 Earnings
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The performance of Morgan Stanley’s (MS - Free Report) trading business (constituting a significant portion of its top line) is expected to have been decent in the fourth quarter of 2024, supported by increased client activity and market volatility. Thus, the company’s trading numbers are likely to have provided some support to its quarterly results, slated to be announced before the opening bell on Jan. 16.
Stay up-to-date with all quarterly releases: See ZacksEarnings Calendar.
In the to-be-reported quarter, the likelihood of continued decent economic expansion, cooling inflation and easing monetary policy drove client activity. Further, volatility was high in equity markets but was decent in other asset classes, including commodities, bonds and foreign exchange. Thus, Morgan Stanley is likely to have recorded robust growth in trading revenues.
The Zacks Consensus Estimate for the company’s equity trading revenues is pegged at $2.38 billion, suggesting a rise of 8.2% from the prior-year quarter. The consensus estimate for fixed-income trading revenues of $1.78 billion indicates year-over-year growth of 24%.
Our estimates for fourth-quarter equity trading revenues and fixed-income trading revenues are $2.78 billion and $1.93 billion, respectively.
Other Factors to Influence Morgan Stanley’s Q4 Earnings
Investment Banking (IB) Income: Following the weakness in 2022 and 2023, global mergers and acquisitions (M&As) witnessed a marked improvement in the fourth quarter of 2024. Both deal value and volume were robust during the quarter, driven by solid financial performance, robust U.S. economic growth, buoyant markets and interest rate cuts. Further, the potential easing of regulatory oversight on M&As by the incoming Trump administration fueled deal-making activities. Nonetheless, lingering geopolitical issues remained a concern. Also, 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 $593.2 million, suggesting a year-over-year fall of 15.5% on record fees earned last year. Our estimate for the same is pinned at $613.1 million.
Moreover, the IPO market saw signs of cautious optimism driven by market volatility and global monetary easing. The impressive equity market performance drove some solid activity in follow-up equity issuances. Further, bond issuance volume was decent on advantageous economic conditions and corporate spreads at near historical lows despite seasonally slow volumes in December. Hence, Morgan Stanley’s underwriting fees are expected to have increased in the quarter.
The consensus estimate for fixed-income underwriting fees is pegged at $515.2 million, suggesting a 31.8% surge. The Zacks Consensus Estimate for equity underwriting fees of $360.6 million indicates a jump of 60.3%. The consensus estimate for total underwriting fees of $875.8 million implies a rise of 42.2% from the year-ago quarter.
Our estimate for fixed-income underwriting fees is $586.4 million, whereas the same for equity underwriting fees is $395.4 million.
Thus, growth in total IB income is likely to have been impressive, driven by the expected rise in underwriting revenues and advisory fees. The Zacks Consensus Estimate for IB income of $1.62 billion indicates a year-over-year rise of 22.8%. Our estimate for IB income is pegged at $1.59 billion.
Net Interest Income (NII): The Federal Reserve lowered the interest rates by 100 basis points since September 2024. This is expected to have offered support to Morgan Stanley’s NII growth prospects as funding/deposit costs gradually stabilize. Further, the central bank signaled two more rate cuts this year. Hence, the overall lending scenario is likely to have improved.
The Zacks Consensus Estimate for NII is pegged at $2.09 billion, suggesting a rise of 10.1% on a year-over-year basis. Our estimate for NII is $2.19 billion.
Expenses: Cost reduction, which has long been Morgan Stanley's main strategy for remaining profitable, is unlikely to have provided major support in the December quarter. As the company has been investing in franchises, overall costs are anticipated to have been elevated. Also, as the company is expected to have recorded robust revenue growth, compensation related to it would have risen.
We expect total non-interest expenses of $11.04 billion, implying a 2.2% year-over-year increase.
What Our Quantitative Model Predicts for MS
According to 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.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Morgan Stanley is +1.79%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Q4 Earnings & Sales Estimates of Morgan Stanley
The Zacks Consensus Estimate for the company’s earnings has been revised 1.3% north to $1.60 per share over the past week. The estimate suggests a 41.6% rise from the year-ago reported number.
The consensus estimate for sales is pegged at $14.71 billion, which indicates an increase of 14.1%.
Here are a couple of peers of Morgan Stanley that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model:
Over the past 30 days, the Zacks Consensus Estimate for GS’ quarterly earnings has moved almost 1% lower to $7.87.
The Earnings ESP for JPMorgan (JPM - Free Report) is +1.95% and it carries a Zacks Rank #3 at present. The company is slated to report quarterly results on Jan. 15.
JPM’s quarterly earnings estimates have been revised 4.7% north at $3.99 over the past 30 days.
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Surge in IB Activities & Solid Trading to Support MS' Q4 Earnings
The performance of Morgan Stanley’s (MS - Free Report) trading business (constituting a significant portion of its top line) is expected to have been decent in the fourth quarter of 2024, supported by increased client activity and market volatility. Thus, the company’s trading numbers are likely to have provided some support to its quarterly results, slated to be announced before the opening bell on Jan. 16.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
In the to-be-reported quarter, the likelihood of continued decent economic expansion, cooling inflation and easing monetary policy drove client activity. Further, volatility was high in equity markets but was decent in other asset classes, including commodities, bonds and foreign exchange. Thus, Morgan Stanley is likely to have recorded robust growth in trading revenues.
The Zacks Consensus Estimate for the company’s equity trading revenues is pegged at $2.38 billion, suggesting a rise of 8.2% from the prior-year quarter. The consensus estimate for fixed-income trading revenues of $1.78 billion indicates year-over-year growth of 24%.
Our estimates for fourth-quarter equity trading revenues and fixed-income trading revenues are $2.78 billion and $1.93 billion, respectively.
Other Factors to Influence Morgan Stanley’s Q4 Earnings
Investment Banking (IB) Income: Following the weakness in 2022 and 2023, global mergers and acquisitions (M&As) witnessed a marked improvement in the fourth quarter of 2024. Both deal value and volume were robust during the quarter, driven by solid financial performance, robust U.S. economic growth, buoyant markets and interest rate cuts. Further, the potential easing of regulatory oversight on M&As by the incoming Trump administration fueled deal-making activities. Nonetheless, lingering geopolitical issues remained a concern. Also, 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 $593.2 million, suggesting a year-over-year fall of 15.5% on record fees earned last year. Our estimate for the same is pinned at $613.1 million.
Moreover, the IPO market saw signs of cautious optimism driven by market volatility and global monetary easing. The impressive equity market performance drove some solid activity in follow-up equity issuances. Further, bond issuance volume was decent on advantageous economic conditions and corporate spreads at near historical lows despite seasonally slow volumes in December. Hence, Morgan Stanley’s underwriting fees are expected to have increased in the quarter.
The consensus estimate for fixed-income underwriting fees is pegged at $515.2 million, suggesting a 31.8% surge. The Zacks Consensus Estimate for equity underwriting fees of $360.6 million indicates a jump of 60.3%. The consensus estimate for total underwriting fees of $875.8 million implies a rise of 42.2% from the year-ago quarter.
Our estimate for fixed-income underwriting fees is $586.4 million, whereas the same for equity underwriting fees is $395.4 million.
Thus, growth in total IB income is likely to have been impressive, driven by the expected rise in underwriting revenues and advisory fees. The Zacks Consensus Estimate for IB income of $1.62 billion indicates a year-over-year rise of 22.8%. Our estimate for IB income is pegged at $1.59 billion.
Net Interest Income (NII): The Federal Reserve lowered the interest rates by 100 basis points since September 2024. This is expected to have offered support to Morgan Stanley’s NII growth prospects as funding/deposit costs gradually stabilize. Further, the central bank signaled two more rate cuts this year. Hence, the overall lending scenario is likely to have improved.
The Zacks Consensus Estimate for NII is pegged at $2.09 billion, suggesting a rise of 10.1% on a year-over-year basis. Our estimate for NII is $2.19 billion.
Expenses: Cost reduction, which has long been Morgan Stanley's main strategy for remaining profitable, is unlikely to have provided major support in the December quarter. As the company has been investing in franchises, overall costs are anticipated to have been elevated. Also, as the company is expected to have recorded robust revenue growth, compensation related to it would have risen.
We expect total non-interest expenses of $11.04 billion, implying a 2.2% year-over-year increase.
What Our Quantitative Model Predicts for MS
According to 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.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Morgan Stanley is +1.79%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Q4 Earnings & Sales Estimates of Morgan Stanley
The Zacks Consensus Estimate for the company’s earnings has been revised 1.3% north to $1.60 per share over the past week. The estimate suggests a 41.6% rise from the year-ago reported number.
The consensus estimate for sales is pegged at $14.71 billion, which indicates an increase of 14.1%.
Morgan Stanley Price and EPS Surprise
Morgan Stanley price-eps-surprise | Morgan Stanley Quote
Morgan Stanley’s Peers to Consider
Here are a couple of peers of Morgan Stanley that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model:
Goldman Sachs (GS - Free Report) is scheduled to release quarterly earnings on Jan. 15. The company has a Zacks Rank #3 and an Earnings ESP of +2.47% at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past 30 days, the Zacks Consensus Estimate for GS’ quarterly earnings has moved almost 1% lower to $7.87.
The Earnings ESP for JPMorgan (JPM - Free Report) is +1.95% and it carries a Zacks Rank #3 at present. The company is slated to report quarterly results on Jan. 15.
JPM’s quarterly earnings estimates have been revised 4.7% north at $3.99 over the past 30 days.