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Morgan Stanley - After A Solid Quarter, Only Buy On Dips
- Morgan Stanley posted excellent third quarter earnings last week.
- Both the investment banking and wealth management business performed very strong.
- Shares trade at a fair valuation, but note that current operating conditions are very favorable already.
- Unlike many other banks which suffer from lower interest rates, Morgan Stanley might actually benefit from them.
- Given the favorable point in the economic cycle and long term risks to the business model, I only buy on dips.
- MS beat consensus on the top and bottom lines.
- The strong earnings confirms our bullish thesis that MS is a value and growth play.
- We felt the bank was strongly positioned to top Q3 earnings and note there's more to come.
Morgan Stanley: Good Results Driven By Market StrengthDiesel • Mon, Oct. 20
- Morgan Stanley posted a profit increase of 89% compared to last year.
- The results were mostly driven by the strength of the equity market.
- In the short term, market weakness might hurt these results but the long-term story is intact.
- The company's valuation is attractive at 10 times earnings and 1 time book value.
- Morgan Stanley is scheduled to report Q3 2014 earnings before the opening bell on Friday, October 17th.
- Earnings Per Share Excluding Items: The current Street estimate is $0.54 (range $0.48 to $0.58).
- Revenues: The current Street estimate is for an increase of 0.8% y/y to $8.17 bln (range $7.74 bln to $8.51 bln).
Goldman Sachs Vs. Morgan Stanley: Which Is The Better Investment?
- Morgan Stanley has better EPS and revenue growth than Goldman.
- Goldman Sachs trades at a cheaper forward multiple than Morgan Stanley.
- Both are poised to benefit from continued strength in M&A activity and IPO demand.
Morgan Stanley: A Top Brokerage Getting Back Into Commodities
- While this is one of the top brokerages in the U.S. it’s now looking to get into the CNG business.
- It’s looking to use its Grandfather status to build and operate a nat gas facility.
- And why not? It’s in the business of building shareholder value and this looks to be an ideal time for nat gas investments.
- MS was charged with failing to scrutinize the operations of one of their accounts, SureInvestments, which was found to be involved in a U.K. Ponzi scheme.
- The fine was relatively small ($280,000), relative to the billions shelled out by peer institutions for dishonest practices.
- Relative to peers BAC and C, MS is looking strong; MS earnings results were positive; MS has beaten earnings estimates for the past seven quarters, consistently.
- We are optimistic that MS could be a strong selection moving forward, despite the SureInvestment embarrassment.
Adding Risk By Closing Morgan Stanley And Putting Profits To Work In Under Armour
- Morgan Stanley is a high growth financial company which pays a dividend, but I closed my position because I had a great profit in a short amount of time.
- Under Armour is a consumer goods stock which should thrive if the US consumer is on the rebound and as people try to get in better shape.
- By adding Under Armour to the growth portfolio I'm adding a bit more risk as the company doesn't pay a dividend.
Morgan Stanley: Real Value Hemmed In By Litigation Issues
- While the players of the industry witnessed a decline of 1% in their revenues in equity sales and trading, the company was able to register a CAGR of 7%.
- RWAs were down to $192 billion in the most recent quarter, mainly driven by decreased exposure to securitization and credit spread products.
- The wealth management segment continues to expand its revenue base on the back of increased scale and substantial asset growth, mainly achieved through successful integration with Citigroup's wealth management business.
- The wrongdoings of the institution have come back to haunt its bottom line once again in this quarter.
- The stock price is currently depressed due to the litigation hype.
Morgan Stanley Is At A Strong Support Level Right Now
- I sold out of Concho Resources because I had a quick gain in the stock and I was too "oily" in my growth portfolio.
- Morgan Stanley is a growth stock in the financial sector which also pays a dividend and is a value play.
- I believe Morgan Stanley has a strong floor of support at $33.
Morgan Stanley Jumps On Earnings, Building Foundation For Lasting Growth
- Q2 results for MS far exceeded the results of its main rivals BAC, JPM, and C; as well as Wall Street’s overall expectations.
- This stellar accomplishment is due mainly to the investment banking divisions and strength in its wealth management.
- MS has rare Wall Street management and is so far pretty clean from the huge scandals that have dragged down its peers over the past several years.
- We remain very positive on MS—viewing these earnings as a small boost on an overall, consistent climb in 2014.
Morgan Stanley - Gorman's Strategy Creates Stability And Value, And Is Already Paying OffThe Value Investor • Mon, Jul. 21
- Morgan Stanley posted strong second quarter results, even adjusting for DVA and tax benefits.
- CEO Gorman's strategy to focus on wealth and investment management creates visibility and high earnings.
- The freed up capital from exiting capital-intensive businesses is already being returned to investors, creating further appeal.
- Morgan Stanley saw client assets soar to over $2T in Q2 2014.
- Profit in wealth management reached 21% of net revenue in Q2 2014.
- CEO James Gorman plans to grow this profit to 22% to 25% by the end of 2015.
- Read further for Gorman's 5 main points on MS's future growth. The plans and strategy seem sound.
- Morgan Stanley is scheduled to report 2Q 2014 earnings before the opening bell on Thursday, July 17th.
- Earnings Per Share, Excluding Items: If provided, the value for this measure is most often the comparable figure to consensus estimates. The current Street estimate is $0.56.
- Revenues: The current Street estimate is a decrease of 1.3% y/y to $8.22 bln (range $7.58 bln to $8.65 bln).
Goldman/Morgan Earnings Previews: Is The Goldman/Morgan Banking Model A Fading Relic?
- Dodd-Frank and the regulators seem to be targeting volatility.
- In terms of the financial system, there is a higher premium being put on stability and certainty.
- Choose asset gatherers which have more consistent and dependable earnings results.
Morgan Stanley Bonds: Default Risk Improves But Bond Value Slips
- Morgan Stanley default probabilities have dropped by 0.01% to 0.03% since April 25, and peer group rankings have improved.
- Bond value, as measured by the credit spread to default probability ratio, has slipped from slightly above average to slightly below average.
- We believe that a majority of sophisticated analysts would still rank the firm as "investment grade." The default-adjusted dividend yield is 0.18% below the traditional dividend yield.
- Morgan Stanley is undergoing a positive change in fixed income, money management, investment banking, and other sectors.
- Shifts come at a time when peers are truly flailing.
- We recommend Morgan Stanley as a Buy in 2014, compared with the overall industry.
- It has been a mixed year for the stock so far and I believe it will continue to be so.
- Meeting the requirements for changes in business the model is inevitable as new investment banking regulations step in.
- The vision of making a fresh push into consumer banking would be the remedy.
Wed, Nov. 5, 3:06 AM
- Morgan Stanley (NYSE:MS) will receive a one-time lift of $1.3B due to a change in the structure of its Morgan Stanley Smith Barney operation.
- On Oct. 31, Morgan Stanley Smith Barney was converted from a partnership to a corporation. That change allowed the bank to release $1.3B it had previously set aside for taxes.
- The restructuring is not expected to change Morgan Stanley’s tax rate going forward, but it will help the bank’s profitability in Q4.
Thu, Oct. 23, 4:49 PM
- Not having had the pleasure of being subject to the stress test and CCAR previously, Deutsche Bank's (NYSE:DB) U.S. unit will be a participant next year
- As in prior years, those BHCs with large trading operations - BAC, C, GS, JPM, MS, WFC - will be required to factor in a global market shock as part of their scenarios.
- Those six, plus STT and BK - thanks to their custodial operations - will be required to incorporate a counterparty default scenario.
- Among the items in the severely adverse scenario is the unemployment rate jumping to 10%, a 60% dive in the stock market, and oil jumping to $110 per barrel (how about oil falling to $10 per barrel?).
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, IAI, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KCE, KRU, KBWR, RWW, RYF, KBWC, FINZ, KRS
Tue, Oct. 21, 11:44 AM
- Flying in the face of a regulatory environment hostile to such moves, Morgan Stanley (MS +1.8%) began a business - once codenamed "Project Venezuela" and now known as Wentworth Gas Marketing - to export compressed natural gas to Caribbean and Latin American countries.
- Now, says the FT, Morgan is mulling a sale of the operation and Simon Greenshields - the bank's co-head of commodities - has been in contact with possible buyers.
- In addition to the now-normal regulatory and political hostility to banks doing anything other than banking, there's worry about the risk of shipping compressed natural gas., something the Fed has made clear to Morgan.
Fri, Oct. 17, 3:03 PM
- "We view this as a great quarter, which demonstrates good progress on both production and efficiency. We continue to like Morgan Stanley (MS +1.8%) and its peers, and believe the recent pullback represents an attractive buying opportunity. We expect a good Q4 follow-through, and believe CCAR capital returns will be increased in the next couple of cycles as excess capital builds," says MKM's David Trone.
- "The beat was entirely driven by the top-line which came in $0.15 higher due to better than expected investment banking, FICC, and equities," says Citi's Keith Horowitz and Chris Larmoyeux. The beat despite the high bar for capital markets names, he says, bodes well for the stock, particularly given the recent sizable selloff.
- Previously: Morgan Stanley higher after earnings beat
Fri, Oct. 17, 7:30 AM
- Q3 income from continuing operations (excluding DVA) of $1.6B of $0.77 per share vs. $1B and $0.50 one year ago. This year's Q boosted by net discrete tax benefit of $237M or $0.12 per share.
- Institutional Securities pre-tax income from continuing operations of $1.2B vs. $396M a year ago. Advisory revenue of $392M vs. $275M thanks to boosted M&A activity. Equity underwriting revenue of $464M vs. $236M thanks to boosted IPO activity. FICC net revenue of $997M vs. $835M (about inline with what a few other banks posted). Compensation expense of $1.8B vs. $1.6B.
- Wealth Management pre-tax income of $836M vs. $668M a year ago, on net revenue of $3.8B vs. $3.5B. Asset management fees of $2.2B vs. $1.9B. Net interest income of $601M vs. $493M thanks to higher deposits and loan balances. Compensation expense of $2.2B vs. $2B. Wealth managers of 16,162 fell from 16,517, with average annualized revenue per advisor of $932K up 10%.
- Investment Management pre-tax income of $188M vs. $300M a year ago.
- Tangible book value per share of $29.25. Roughly $195M of stock repurchased during Q, or 5.9M shares.
- MS +2.8% premarket
- Previously: Morgan Stanley beats by $0.23, beats on revenue
Fri, Oct. 17, 7:16 AM
Thu, Oct. 16, 5:30 PM
Tue, Oct. 14, 3:31 PM
- Global growth, foreign-exchange, oil, and small caps are the subject of every client inquiry, says David Kostin. His team's recommendation: Buy "American exceptionalism."
- In Kostin's view, U.S. economy and corporate fundamentals are still strong, with economic growth expected by Goldman economists to be 3.2% next year, the fastest expansion since 2005. Europe is expected to grow just 1%.
- What his team likes are those stocks of companies which have a high proportion of domestic sales, plus sectors like Consumer Staples (XLP -0.1%) and Discretionary (XLY +0.7%) which stand to benefit from lower oil prices (plunging again today).
- As for small caps (IWM +0.9%), Kostin is wary, noting downward earnings revisions have boosted small cap P/E ratios even as prices have declined.
- The list of S&P 500 names capturing two or more of Kostin's themes: GT, GM, PCLN, AMZN, CMCSA, LOW, DG, TSN, ADM, CVS, AVP, WAG, PXD, HAL, JPM, BAC, SCHW, PNC, MS, C, GNW, LNC, MET, THC, AET, UNH, ESRX, HUM, WLP, BIIB, GILD, DAL, CMI, FLR, CRM, JBL, MA, FB, MU, FSLR, VMC, MON, T.
Tue, Oct. 14, 11:10 AM
- JPMorgan scored a 2.1% Y/Y increase in FICC revenue in Q3, also up 0.9% from the previous quarter. This comes following sizable trading revenue declines in previous quarters, and further slippage had been expected this quarter.
- Also reporting today, Citigroup showed a 6.7% rise in trading revenue, topping its own guidance.
- The results, says Credit Suisse's Christian Bolu, bode well for Goldman Sachs (GS +0.7%) and Morgan Stanley (MS +0.8%). Helping was the return of at least a little volatility in September (there's been plenty more in Q4's first month), not to mention an easy comparison with last year's poor levels.
- CS's Bolu previously expected Goldman to show a 3% Q3 FICC revenue drop and Morgan a 16% decline.
- Previously: JPMorgan: Interest income and FICC gain
- Previously: Citigroup +2.3% after earnings beat
Fri, Oct. 10, 4:58 PM
- Morgan Stanley (NYSE:MS) says its agreement to sell oil trading and storage businesses to Rosneft (OTC:RNFTF) may not close in time to beat a year-end deadline, as tensions between the U.S. and Russian governments leave the deal in limbo.
- MS, which reached an agreement with Rosneft in December, is running out of time to win approval from the CFIUS committee that weighs national security risks, before its agreement expires at year’s end.
- MS probably would consider other buyers if the agreement with Rosneft unravels.
Fri, Oct. 10, 2:37 PM
- "Steadily improving economic and capital markets backdrop will drive investment banking and loan growth higher, while trading is likely to rebound as the extended period of low volume and volatility is starting to shift back toward more normal conditions in September," say MKM's David Trone and Pankaj Chitrakar, expecting to see earnings for five bulge-bracket banks higher by 11% in Q3.
- The team remains bullish on all five, but sees just four - Citigroup (C -0.9%), Bank of America (BAC +0.5%), Goldman Sachs (GS +0.5%), and Morgan Stanley (MS +0.4%) - beating estimates. JPMorgan (JPM +0.3%) should just meet the $1.38 EPS consensus, they say, with strength in investment banking offset by declining mortgage banking.
Fri, Oct. 10, 12:52 PM
- The banking industry is very close to resolving too big to fail, says Jamie Dimon (JPM +0.6%), speaking publicly for the first time since his cancer diagnosis (other than his July earnings call appearance). He's appearing at a conference roundtable alongside Morgan Stanley's (MS +0.8%) James Gorman, Deutsche's (DB -0.9%) Anshu Jain, and Bank of America's (BAC +0.7%) Brian Moynihan.
- Webcast here
- The most pointed remarks so far come from Deutsche's Jain, who tells those who would continue to further strangle the banks with more regulation to look to Europe. Straightforward banking - taking deposits and making loans - is far more the norm there then here, he says, and the forcing of banks to trim businesses and balance sheets is a large contributor to the Continent's stagnant growth.
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, IAI, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KCE, KRU, KBWR, RWW, RYF, KBWC, KRS, FINZ
Thu, Oct. 9, 10:04 AM
- Morgan Stanley (MS -1.3%) is the only bank to have advised on each of 2014's largest acquisition deals, including serving as the sole banker to WhatsApp in its $18B sale to Facebook, according to Bloomberg. Morgan also had a piece of the Alibaba IPO and has jumped to 4th place from 7th in junk bond underwriting.
- JPMorgan (JPM -0.4%) and CItigroup (C -0.6%), on the other hand, face the fastest-shrinking bonus pools, with The Bank of Dimon notable for having the steepest drop in fixed-income trading revenue among the five largest Wall Street banks.
- JPMorgan, Citigroup, and Wells Fargo are set to release Q3 results next Tuesday, with Bank of America, Goldman Sachs, and Morgan Stanley following shortly thereafter.
Tue, Oct. 7, 7:39 AM
- Ahead of Q3 earnings results set for release this month, Wells Fargo lifts its price targets on those banks with sizable capital markets businesses, citing strong investment banking action and trading activity that's stopped falling.
- Outperform-rated Ciitgroup (NYSE:C) and JPMorgan (NYSE:JPM) have their price targets lifted to $60 from $57, and $68 from $66, respectively.
- Market Perform-rated Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) have their targets lifted to $19 from $17, $195 from $185, and $37 from $35, respectively.
Thu, Sep. 25, 7:11 AM
- Sanctions could make financing day-to-day operations a near-impossibility, according to sources close to Rosneft (OTC:RNFTF), reports Reuters. The chances of a deal going through, they say, range from "possible" to "highly unlikely."
- The business up for sale trades actual barrels of crude oil, not just futures contracts, putting Morgan Stanley (NYSE:MS) under regulatory pressure to exit an operation where something like an oil tanker leak could expose it to billions in liability.
- Rosneft late last year agreed to pay between $300M-$400M in cash for the unit, but the actual operation of the business requires billions in bank lines of credit - something which could prove difficult to secure given Western sanctions.
- "This deal just cannot go through," says one of Reuters' sources. "It is not an issue of finding $300M to buy the business. Rosneft has the money. But it won't be able to operate it."
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