Will Morgan Stanley (MS) Disappoint This Time? - Analyst Blog
January 15 2014 - 9:50AM
Zacks
Morgan Stanley (MS) is scheduled to release
fourth-quarter and full-year 2013 results on Friday, Jan 17, before
the opening bell.
In the last quarter, Morgan Stanley delivered a positive earnings
surprise of 19.1% driven by disciplined expense management and
top-line growth. It marked the fifth straight quarter of positive
earnings surprise.
However, will the company be able to keep the earnings streak
alive? Let us see how things have developed for this
announcement.
Factors to Influence Q4 Results
We expect expense control and sound balance sheet as recorded in
the third quarter to remain the key earnings drivers in the fourth
quarter. Moreover, higher trading revenues on the back of enhanced
equity market dynamics should boost the top line. Additionally, the
decline in unemployment rate, an improving housing sector and
flexible monetary policies are likely to aid growth.
Further, Morgan Stanley’s initiatives to offload its non-core
operations to lower balance sheet risks and its primary focus on
the less capital incentive Investment Management and Wealth
Management segments are commendable. In Dec 2013, the company took
a step in the right direction by distancing itself from commodities
operations by announcing the sale of its Global Oil Merchanting
unit to Russia-based Rosneft Oil Company.
Moreover, unlike other Wall Street biggies, litigation issues have
not plagued Morgan Stanley in the fourth quarter. However, we do
not expect any significant rise in interest income due to sluggish
loan demand and a persistent low interest rate environment.
Nevertheless, Morgan Stanley’s activities during the fourth quarter
of the year were sufficient to win analysts’ confidence. As a
result, the Zacks Consensus Estimate for the quarter increased 2.3%
to 45 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Morgan Stanley is
likely to beat the Zacks Consensus Estimate in the fourth quarter.
That is because a stock needs to have both a positive Earnings ESP
and a Zacks Rank #1 (Strong Buy) or at least 2 or 3 for this to
happen. Unfortunately, this is not the case here as elaborated
below.
Negative Zacks ESP: The Earnings ESP for
Morgan Stanley is -2.22%. This is because the Most Accurate
estimate of 44 cents is below the Zacks Consensus Estimate of 45
cents.
Zacks Rank: Morgan Stanley’s Zacks Rank #3 (Hold),
however, increases the predictive power of ESP. Nevertheless, we
need to have a positive ESP to become confident of a positive
earnings surprise call.
Other Stocks to Consider
Here are a few finance stocks you may want to consider as our model
shows that these have the right combination of elements to post an
earnings beat this quarter:
The earnings ESP for State Street Corporation
(STT) is +3.36% and it carries a Zacks Rank #3. The company is
scheduled to release fourth-quarter results on Jan 24.
The earnings ESP for Northern Trust Corporation
(NTRS) is +1.32% and it has a Zacks Rank #3 (Hold). The company is
slated to release fourth-quarter results on Jan 22.
Fifth Third Bancorp (FITB) has an earnings ESP of
0.00% and holds a Zacks Rank #2 (Buy). It is scheduled to report
fourth-quarter results on Jan 23.
FIFTH THIRD BK (FITB): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
NORTHERN TRUST (NTRS): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
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