We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Morgan Stanley (MS) Q4 Earnings, Revenues Lag on Trading Woe
Read MoreHide Full Article
Weak trading and underwriting performance affected Morgan Stanley’s (MS - Free Report) fourth-quarter 2018 adjusted earnings of 73 cents per share, which lagged the Zacks Consensus Estimate of 90 cents. The figure also reflected 13% decline from the prior-year quarter.
Shares of Morgan Stanley have declined more than 4% in pre-market trading. Notably, the stock’s price performance after the full day’s trading will give a better indication about investors’ sentiments.
Dismal underwriting (both equity and fixed income) revenues (down 25%) and fixed income trading revenues (down 30%) hurt Morgan Stanley’s quarterly results. Additionally, net interest income recorded a fall.
However, stable equity trading income and improvement in advisory revenues (up 41%) acted as tailwinds. Further, operating expenses witnessed a decline. Also, the company’s capital ratios remained strong.
Net income applicable to Morgan Stanley was $1.53 billion, up substantially from $643 million in the prior-year quarter.
In 2018, adjusted earnings of $4.61 per share missed the Zacks Consensus Estimate of $4.86. However, the figure was up 28% year over year. Net income applicable to Morgan Stanley was $8.74 billion, up 43%.
Trading, Investment Banking Hurt Revenues, Costs Down
Net revenues amounted to $8.54 billion, a decline of 10% from the prior-year quarter. In addition, the top line lagged the Zacks Consensus Estimate of $9.44 billion.
In 2018, net revenues rose 6% year over year to $40.11 billion. However, it marginally missed the Zacks Consensus Estimate of $40.99 billion.
Net interest income was $989 million, down 1% from the year-ago quarter. This was largely due to a rise in interest expenses, partially offset by higher interest income.
Total non-interest revenues of $7.56 billion fell 11% year over year, primarily due to dismal investment banking and trading performance.
Total non-interest expenses were $6.69 billion, down 5% year over year.
Quarterly Segmental Performance Disappoints
Institutional Securities: Pre-tax income from continuing operations was $780 million, decreasing 37% year over year. Net revenues of $3.84 billion fell 15%. The decline was mainly due to lower trading income and underwriting revenues.
Wealth Management: Pre-tax income from continuing operations totaled $1.1 billion, down 12% on a year-over-year basis. Net revenues were $4.14 billion, decreasing 6% due to a decline in transactional revenues, partly offset by higher asset management revenues and net interest income.
Investment Management: Pre-tax income from continuing operations was $74 million, down 8% from the year-ago quarter. Net revenues were $684 million, up 5%. The increase was mainly driven by higher asset management fees, partially offset by fall in investment revenues.
As of Dec 31, 2018, total assets under management or supervision were $463 billion, down 4% on a year-over-year basis.
Strong Capital Position
As of Dec 31, 2018, book value per share was $42.20, up from $38.52 as of Dec 31, 2017. Tangible book value per share was $36.99, up from $33.46 a year ago.
Morgan Stanley’s Tier 1 capital ratio Advanced (Fully Phased-in) was 19.4% compared with 19.3% in the year-ago quarter. Tier 1 common equity ratio Advanced (Fully Phased-in) was 17.0% compared with 16.9% a year ago.
Share Repurchase Update
During the reported quarter, Morgan Stanley bought back around 27 million shares for nearly $1.2 billion. This was part of the company's 2018 capital plan.
Our Take
Morgan Stanley’s initiatives to offload its non-core assets to lower balance-sheet risks and focus on less capital-incentive operations like wealth management are commendable. Further, normalized level of trading activities and decent investment banking performance will likely support top-line growth. However, mounting operating expenses pose a concern.
Among banking giants, JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) and Citigroup (C - Free Report) have already come out with fourth-quarter results. Similar to Morgan Stanley, financials of these companies was hurt by disappointing investment banking performance.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Morgan Stanley (MS) Q4 Earnings, Revenues Lag on Trading Woe
Weak trading and underwriting performance affected Morgan Stanley’s (MS - Free Report) fourth-quarter 2018 adjusted earnings of 73 cents per share, which lagged the Zacks Consensus Estimate of 90 cents. The figure also reflected 13% decline from the prior-year quarter.
Shares of Morgan Stanley have declined more than 4% in pre-market trading. Notably, the stock’s price performance after the full day’s trading will give a better indication about investors’ sentiments.
Dismal underwriting (both equity and fixed income) revenues (down 25%) and fixed income trading revenues (down 30%) hurt Morgan Stanley’s quarterly results. Additionally, net interest income recorded a fall.
However, stable equity trading income and improvement in advisory revenues (up 41%) acted as tailwinds. Further, operating expenses witnessed a decline. Also, the company’s capital ratios remained strong.
Net income applicable to Morgan Stanley was $1.53 billion, up substantially from $643 million in the prior-year quarter.
In 2018, adjusted earnings of $4.61 per share missed the Zacks Consensus Estimate of $4.86. However, the figure was up 28% year over year. Net income applicable to Morgan Stanley was $8.74 billion, up 43%.
Trading, Investment Banking Hurt Revenues, Costs Down
Net revenues amounted to $8.54 billion, a decline of 10% from the prior-year quarter. In addition, the top line lagged the Zacks Consensus Estimate of $9.44 billion.
In 2018, net revenues rose 6% year over year to $40.11 billion. However, it marginally missed the Zacks Consensus Estimate of $40.99 billion.
Net interest income was $989 million, down 1% from the year-ago quarter. This was largely due to a rise in interest expenses, partially offset by higher interest income.
Total non-interest revenues of $7.56 billion fell 11% year over year, primarily due to dismal investment banking and trading performance.
Total non-interest expenses were $6.69 billion, down 5% year over year.
Quarterly Segmental Performance Disappoints
Institutional Securities: Pre-tax income from continuing operations was $780 million, decreasing 37% year over year. Net revenues of $3.84 billion fell 15%. The decline was mainly due to lower trading income and underwriting revenues.
Wealth Management: Pre-tax income from continuing operations totaled $1.1 billion, down 12% on a year-over-year basis. Net revenues were $4.14 billion, decreasing 6% due to a decline in transactional revenues, partly offset by higher asset management revenues and net interest income.
Investment Management: Pre-tax income from continuing operations was $74 million, down 8% from the year-ago quarter. Net revenues were $684 million, up 5%. The increase was mainly driven by higher asset management fees, partially offset by fall in investment revenues.
As of Dec 31, 2018, total assets under management or supervision were $463 billion, down 4% on a year-over-year basis.
Strong Capital Position
As of Dec 31, 2018, book value per share was $42.20, up from $38.52 as of Dec 31, 2017. Tangible book value per share was $36.99, up from $33.46 a year ago.
Morgan Stanley’s Tier 1 capital ratio Advanced (Fully Phased-in) was 19.4% compared with 19.3% in the year-ago quarter. Tier 1 common equity ratio Advanced (Fully Phased-in) was 17.0% compared with 16.9% a year ago.
Share Repurchase Update
During the reported quarter, Morgan Stanley bought back around 27 million shares for nearly $1.2 billion. This was part of the company's 2018 capital plan.
Our Take
Morgan Stanley’s initiatives to offload its non-core assets to lower balance-sheet risks and focus on less capital-incentive operations like wealth management are commendable. Further, normalized level of trading activities and decent investment banking performance will likely support top-line growth. However, mounting operating expenses pose a concern.
Morgan Stanley Price, Consensus and EPS Surprise
Morgan Stanley Price, Consensus and EPS Surprise | Morgan Stanley Quote
Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among banking giants, JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) and Citigroup (C - Free Report) have already come out with fourth-quarter results. Similar to Morgan Stanley, financials of these companies was hurt by disappointing investment banking performance.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>