Q4 Preview: Why (Almost) Everyone Lowered Morgan Stanley (MS) Estimates
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Morgan Stanley (NYSE: MS) is lower today ahead of their second quarter earnings release, expected out before the market opens tomorrow, January 20. Shares are down 3% in afternoon trading.
Morgan Stanley is expected to report EPS of $0.35 with revs of $7.35 billion. Last quarter, the New York, NY-based financial firm reported EPS of $0.23 with revs of $6.8 billion, both beating the Street consensus. In Q409, Morgan Stanley produced EPS of $0.29 on revs of $6.8 billion, both missing views handily.
Shares gained 13% through the quarter to $28.23 at the end of December. The stock is down 0.9% from the end of last quarter, and ended 2010 about 8% lower.
A simple valuation puts Morgan Stanley with a forward P/E of 9.6x FY11 EPS estimates, compared to 9.6x for Goldman Sachs (NYSE: GS), 9.6x at J.P. Morgan Chase (NYSE: JPM), and 9.8x for Bank of America (NYSE: BAC).
Data from Bloomberg has 16 analysts with a Buy on MS, 14 with a hold, and one suggesting to Sell. The analyst price target average is $32, with a high of $42 and low of $27.
Summary
J.P. Morgan has Morgan Stanley as their top U.S. Investment Bank, but they say its purely on valuation, and management still needs to create value for shareholders. JPM notes that Morgan Stanley's IB strategy expansion "so far has been unsuccessful, especially in Fixed Income whereas Citi and Bank of America are 'back in business'." They continue, "However, considering its capital strength at 9.7% Basel 3 Tier I and valuation position at just 0.9x diluted tangible BV 2012E ex DVA, with 19% of earnings from Wealth Management there is upside potential."
Keefe, Bruyette & Woods recently lowered their estimate as their "lower trading forecast is expected to more than offset [their] higher estimate for investment banking." They are expecting adjusted EPS of $0.35. They quip, "An improved capital markets environment and stabilization in the economic outlook provide a better outlook for operating results into 2011."
EPS estimates were also recently cut at Credit Suisse, from $0.60 to $0.20 in Q410, and FY10 EPS lowered from $2.56 to $2.18. Credit Agricole also reduced their Q410 EPS expectations from $0.61 to $0.40. Citi recently cur their Q410 EPS outlook to $0.42, and Goldman did the same, cutting their outlook to $0.35.
Many cited reduced trading volumes as the reasoning behind the cuts.
Morgan Stanley is expected to release their Q410 earnings on Thursday, January 20, 2011, at approximately 7:30am EST. Stay tuned to StreetInsider.com's EPS Central section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of their release.
Morgan Stanley is expected to report EPS of $0.35 with revs of $7.35 billion. Last quarter, the New York, NY-based financial firm reported EPS of $0.23 with revs of $6.8 billion, both beating the Street consensus. In Q409, Morgan Stanley produced EPS of $0.29 on revs of $6.8 billion, both missing views handily.
Shares gained 13% through the quarter to $28.23 at the end of December. The stock is down 0.9% from the end of last quarter, and ended 2010 about 8% lower.
A simple valuation puts Morgan Stanley with a forward P/E of 9.6x FY11 EPS estimates, compared to 9.6x for Goldman Sachs (NYSE: GS), 9.6x at J.P. Morgan Chase (NYSE: JPM), and 9.8x for Bank of America (NYSE: BAC).
Data from Bloomberg has 16 analysts with a Buy on MS, 14 with a hold, and one suggesting to Sell. The analyst price target average is $32, with a high of $42 and low of $27.
Summary
J.P. Morgan has Morgan Stanley as their top U.S. Investment Bank, but they say its purely on valuation, and management still needs to create value for shareholders. JPM notes that Morgan Stanley's IB strategy expansion "so far has been unsuccessful, especially in Fixed Income whereas Citi and Bank of America are 'back in business'." They continue, "However, considering its capital strength at 9.7% Basel 3 Tier I and valuation position at just 0.9x diluted tangible BV 2012E ex DVA, with 19% of earnings from Wealth Management there is upside potential."
Keefe, Bruyette & Woods recently lowered their estimate as their "lower trading forecast is expected to more than offset [their] higher estimate for investment banking." They are expecting adjusted EPS of $0.35. They quip, "An improved capital markets environment and stabilization in the economic outlook provide a better outlook for operating results into 2011."
EPS estimates were also recently cut at Credit Suisse, from $0.60 to $0.20 in Q410, and FY10 EPS lowered from $2.56 to $2.18. Credit Agricole also reduced their Q410 EPS expectations from $0.61 to $0.40. Citi recently cur their Q410 EPS outlook to $0.42, and Goldman did the same, cutting their outlook to $0.35.
Many cited reduced trading volumes as the reasoning behind the cuts.
Morgan Stanley is expected to release their Q410 earnings on Thursday, January 20, 2011, at approximately 7:30am EST. Stay tuned to StreetInsider.com's EPS Central section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of their release.
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