Morgan Stanley (MS Quick QuoteMS - Free Report) is slated to announce first-quarter 2017 results on Apr 19, before the opening bell.

Last quarter, Morgan Stanley outpaced the Zacks Consensus Estimate, driven by an increase in trading revenues, bond underwriting fees and advisory revenues. However, weakness in equity underwriting income and lower net interest income as well as a rise in expenses were the headwinds.

Despite the earnings beat and optimism surrounding the improving operating backdrop, the company shares ended the first quarter in red. Also, the Zacks Consensus Estimate of 90 cents for the to-be-reported quarter remained stable over the last 30 days. Nonetheless, the estimates indicate year-over-year growth of 64.4%.

Earnings Whispers

Now, let’s check what our quantitative model predicts. Our quantitative model indicates that chances of Morgan Stanley beating the Zacks Consensus Estimate in the first quarter are less. The stock doesn’t have the right combination of two main factors – positive Earnings ESP and a Zacks Rank #3 (Hold) or better – for this to happen.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Morgan Stanley is -1.11%. This is because the Most Accurate estimate of 89 cents is lower than the Zacks Consensus Estimate.

Zacks Rank: Morgan Stanley carries a Zacks Rank #3. While this increases the predictive power, we need to have positive Earnings ESP to be confident of an earning beat.

Morgan Stanley Price and EPS Surprise

 

Morgan Stanley Price and EPS Surprise | Morgan Stanley Quote

Factors at Play  

Trading Income Growth Might have Remained Strong: Trading revenues are likely to reflect improvement in the quarter, as there was uncertainty related to Donald Trump's potential policy changes. Also, the company’s efforts to technologically upgrade its systems must have supported the trading revenue growth. Further, client activity must have been to be higher for both fixed income and equity trading.

Underwriting Fees Should have Grown: Driven by an improving operating environment and economic stability, the first quarter witnessed a rise in demand for debt and recorded a rise in equity issuance.

Per the data compiled by Thomson Reuters, bond market activities led to more than 16% increase in underwriting fees in the first quarter. Notably, Morgan Stanley is projected record nearly 29% year over year rise in debt underwriting fees.

Likewise the data indicates global fees related to equity capital markets activity roughly totaled $5.1 billion during the first quarter, up over 90% year over year. Morgan Stanley’s equity underwriting fees are likely to jump approximately 77% from the prior-year quarter to $295.5 million.

Advisory Fee Revenues Might have Declined: In face of uncertainty related to policy matters and political changes, global deal making seems to have remained steady during the first quarter. This is reflected by more than 6% increase in global deal value, according to the Thomson Reuters data.

Despite this favorable data, overall fees earned through deal making are projected to have declined. Similarly, Morgan Stanley is expected to earn $300.8 million as advisory fees in the quarter, indicating a fall of 41.5% from the prior-year quarter.

Net Interest Income Growth to Lag: Despite rise in interest rates, Morgan Stanley is likely to have faced lower loan growth during the quarter, thereby denting growth in net interest income.

Expenses Must have Risen: Improvement in revenues should have led to an increase in compensation expenses during the quarter. This is likely to more than offset the cost savings driven by Morgan Stanley’s expense savings initiatives.

Stocks Worth a Look

Here are a few finance stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming releases.

Texas Capital Bancshares, Inc. (TCBI Quick QuoteTCBI - Free Report) is scheduled to report results on Apr 19. It has an Earnings ESP of +2.27% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BB&T Corporation has an Earnings ESP of +4.29% and a Zacks Rank #3. It is scheduled to report first-quarter 2017 results on Apr 20.

The Earnings ESP for Ameriprise Financial, Inc. (AMP Quick QuoteAMP - Free Report) is +0.79% and it carries a Zacks Rank #2. The company is scheduled to release results on Apr 24.

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