North America

Earnings Preview: Morgan Stanley Q1 2017 (MS)

By: Craig Bowles

Overview

Morgan Stanley (MS) is scheduled to report 1Q 2017 earnings before the opening bell on Wednesday, April 19th. The results are expected at approximately 7:00 a.m. ET with a conference call webcast at Morgan Stanley Investor Relations to follow at 8:30 a.m.

msP

Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS) or Earnings Per Share Ex-Items: If provided, these measures are most often the comparable figure to consensus estimates. Two of the past five quarters provided only Earnings Per Share (EPS). Analyst consensus estimate is $0.88 (range $0.83 to $0.92). (Source: Yahoo! Finance) Consensus was $0.87 three months ago.
  • Revenues: Analyst consensus expectations are for $9.27 bln (range $8.96 bln to $9.65 bln).
  • Morgan Stanley’s trailing P/E of 13.9 compares to an industry average of 17.5; Price/Book of 1.1 compares to a five-year average of 0.8; Price/Revenue of 2.2 compares to a five-year average of 1.7, Price/Cash Flow of 31.4 compares to a five-year average of 8.3. Dividend yield of 1.8% compares to the 5-year average 1.2%.
  • Analysts view Morgan Stanley with 17 (13 last qtr) Buy, 10 Hold, and 1 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 144,533 shares over the last three months and a net 2,285,584 shares in the past year. (source: NASDAQ.com) In June 2016, Morgan Stanley announced plans to spend $3.5 billion on share buybacks and hiked the dividend by 33%.
  • Morgan Stanley shares have a 1-day average price change on earnings of 1.65%. Options are pricing in an implied move of 3.26% off earnings.

Recent News

  • 04/06: Morgan Stanley is moving ahead with changes related to the now-delayed fiduciary rule by lowering commissions and reducing the number of mutual funds it offers, according to a post on Barron’s.com.
  • 03/15: Morgan Stanley plans continue commission-based accounts even if the DOL rule is implemented by retraining brokers, having clients sign additional disclosure contracts, and adding new supervisory software, according to a post on Barron’s.com.
  • 02/21: While the XLF is up 45% in the past year, Ladenburg Thalmann notes that bigger banks’ earnings will benefit from rising rates more than smaller banks given that they have some $5 trillion in investible, liquid assets, according to a post on Barron’s.com.
  • 02/17: The country’s biggest banks would see an average jump in annual profits of 14% if Trump is able to push his plan through. The KBW Bank Index has risen 29% since the election, according to a post on Barron’s.com.
  • 02/03: Bank stocks have gained partially on President Trump’s plan roll back financial regulations such as Dodd-Frank and another executive action aimed at rolling back a controversial regulation scheduled to take effect in April that critics have said would upend the retirement-account advisory business, according to a post on Barron’s.com.
  • 02/01: Morgan Stanley remains Overweight the big banks while pointing out that large cap banks are trading relatively in-line with historical multiples, but that’s on current EPS estimates and there are several positive catalysts this year: stable-to-lighter touch on regulation, infrastructure spend, deficit-led growth, rate hikes and potential for lower taxes, according to a post on Barron’s.com.

Technical Review

Morgan Stanley stock looks somewhat like Bank of America in that they are the two strongest banks over the past year and moved above their 2015 highs but haven’t shown a lot of upside since the initial bounce from early 2009 lows. Better than Citi but nothing like JPM and WFC. That could be a positive if we get some more of the rotation we’ve seen the past year. Point and figure charts don’t show much in the way of balance area support above the low 30s. (Chart courtesy of StockCharts.com)

msC

Summary

Morgan Stanley is lowering commissions for stocks, ETFs, annuities and UITs but that is a worry for next quarter’s earnings. Morgan Stanley insiders had been buying the stock but reversed course and sold into the strength of the Trump rally. The last four quarters show earnings beat by an average of 15c. Estimize consensus for EPS Excluding Items of $0.90 on revenue of $9.137 bln compares to analyst consensus of $0.88 on revenue of $9.27 bln.

 

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