Should Morgan Stanley Be Getting More Out of Q2 Earnings?

Morgan Stanley (NYSE: MS) released its second-quarter financial results before the markets opened on Wednesday. The company said that it had $1.30 in earnings per share (EPS) and $10.6 billion in revenue. The consensus estimates from Thomson Reuters had called for $1.11 in EPS and revenue of $10.1 billion, and in the same period of last year the investment bank posted EPS of $0.87 and $9.5 billion in revenue.

At the end of the latest quarter, book value and tangible book value per common share were $40.34 and $35.19, respectively. Also, the firm’s Common Equity Tier 1 and Tier 1 risk-based capital ratios under the fully phased-in Standardized Approach were approximately 15.8% and 18.1%, respectively.

In terms of its segments the bank reported as follows:

  • Institutional Securities net revenues were $5.7 billion reflecting strong performance across our Sales and Trading franchise and Investment Banking, with Global Announced and Completed M&A and Global IPOs ranked #1.
  • Wealth Management net revenues were $4.3 billion with a pre-tax margin of 26.8% reflecting continued improvement in operating leverage.
  • Investment Management net revenues were $691 million on higher management fees. Assets under management of $474 billion reflect continued positive long-term net flows in the quarter.

Morgan Stanley offered no guidance, but consensus estimates call for $1.10 in EPS and $9.72 billion in revenue for the quarter.

James P. Gorman, board chair and chief executive, commented:

We reported robust revenue and earnings growth this quarter with strength across all businesses and geographies. The second quarter performance reflected active markets and healthy client engagement. Our strong global franchise positions us well to continue to grow organically across each of our businesses and to deliver operating leverage.

Shares of Morgan Stanley closed Tuesday at $49.18, with a consensus analyst price target of $59.68 and a 52-week trading range of $43.84 to $59.38. Following the announcement, the stock was up about 3% at $50.59 in early trading indications Wednesday.

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