Stock Market News – Morgan Stanley next in line to release quarterly results
April 17, 2018 2:26 pm
Investment banking giant Morgan Stanley will be releasing its earnings report for Q1 2018 before Wednesday’s opening bell on Wall Street. The consensus recommendation for the company is “buy”, in line with the average consensus recommendation for the Investment Banking & Brokerage Services peer group.
The New York-based firm is forecast to have made $1.25 in earnings per share (EPS) during the first quarter of the year according to analysts submitting their projections to Thomson Reuters’ estimate system (the Institutional Brokers’ Estimate System – I/B/E/S). The current estimate is the result of an upward revision from $1.23 from four weeks ago. Should expectations materialize, this would represent an increase by 25% relative to the corresponding quarter from last year when the company made $1.00 per share. Analysts’ EPS forecasts range from $1.15 to $1.33. Morgan Stanley’s EPS release managed to exceed analysts’ average estimates in all four quarters that preceded.
A positive earnings surprise could be met with buy orders for the Wall Street company’s stock, with resistance to price advances possibly coming around the current level of the 50-day moving average at $54.94. Stronger bullish movement could meet an additional barrier around the $57 handle, an area which was somewhat congested in recent months. Conversely, a data miss might spur sell orders. Support in this case could come around the $52 mark which was tested numerous times during late March and early April and managed to resist a daily close below it. A downside violation would turn the attention to the current level of the 200-day MA at $50.81. Empirically, the sharper the deviation between expected and actual results, the higher the odds for sharper movements in a given corporation’s share price.
The short-term picture for Morgan Stanley’s stock is looking predominantly neutral at the moment, with the RSI largely moving sideways over the last couple of weeks.
In terms of the outlook for financials, some factors that are painting a rosy picture are a US economy – being helped by lower taxes – that is strongly expanding, a Federal Reserve that firmly remains on a rate normalization path – higher interest rates translate into higher margins for banks – and deregulation in the sector. Anything that derails the aforementioned drivers has the capacity to act as a drag on financials. As regards scaling back on regulatory hurdles stemming from the 2008 global financial crisis, the fate of such actions could well be determined by November’s mid-term elections where all seats of the House of Representatives and 33 of 100 Senate seats will be contested. Republicans losing power is seen as weakening the probability for a softer regulatory environment in the banking sector. Also of importance, especially for investment banks, is volatility making a comeback in equity markets, something which is supporting their revenues from trading, but could also hurt their underwriting & advisory business.
Morgan Stanley is an S&P 500 constituent. Year-to-date and prior to Tuesday’s US market open, the S&P is trading higher by 0.2%, with Morgan Stanley’s equivalent performance standing at 1.8%. The investment bank also outperforms the S&P 500 financial sector index which is down by 1.3% year-to-date.
From a price-to-earnings valuation perspective, Morgan Stanley’s forward P/E ratio (price over forecasted earnings) is at 11.3, roughly in line with its peer group. Analysts’ median and mean price target on the stock are at $61.00 and $61.17 respectively, pointing to upside potential relative to current valuation levels.
It should be kept in mind that the overall sentiment in equity markets could also be driven by geopolitics – developments related to the Syrian conflict – as well as any updates on global trade disputes. However, at least for now, these seem to have taken the back seat, with investors focusing on corporate earnings as the major catalyst fueling stock market movements. Analysts project Q1 profits for S&P 500 companies to jump by 18.5% relative to a year ago, this constituting the largest gain in seven years. To the extent developments on other fronts led to more conservative positioning in equity markets than justified by earnings expectations, opportunities might exist for lucrative long positions.
Lastly, it is noteworthy that Morgan Stanley rival Goldman Sachs released its respective quarterly results before today’s US market open. It managed to handily beat forecasts, with its trading division posting a notable comeback after acting to the detriment of the company’s bottom line throughout 2017. It remains to be seen whether Goldman’s release will act as a preamble for Morgan Stanley’s corresponding figures.
Investment banking giant Morgan Stanley will be releasing its earnings report for Q1 2018 before Wednesday’s opening bell on Wall Street. The consensus recommendation for the company is “buy”, in line with the average consensus recommendation for the Investment Banking & Brokerage Services peer group.
The New York-based firm is forecast to have made $1.25 in earnings per share (EPS) during the first quarter of the year according to analysts submitting their projections to Thomson Reuters’ estimate system (the Institutional Brokers’ Estimate System – I/B/E/S). The current estimate is the result of an upward revision from $1.23 from four weeks ago. Should expectations materialize, this would represent an increase by 25% relative to the corresponding quarter from last year when the company made $1.00 per share. Analysts’ EPS forecasts range from $1.15 to $1.33. Morgan Stanley’s EPS release managed to exceed analysts’ average estimates in all four quarters that preceded.
A positive earnings surprise could be met with buy orders for the Wall Street company’s stock, with resistance to price advances possibly coming around the current level of the 50-day moving average at $54.94. Stronger bullish movement could meet an additional barrier around the $57 handle, an area which was somewhat congested in recent months. Conversely, a data miss might spur sell orders. Support in this case could come around the $52 mark which was tested numerous times during late March and early April and managed to resist a daily close below it. A downside violation would turn the attention to the current level of the 200-day MA at $50.81. Empirically, the sharper the deviation between expected and actual results, the higher the odds for sharper movements in a given corporation’s share price.
The short-term picture for Morgan Stanley’s stock is looking predominantly neutral at the moment, with the RSI largely moving sideways over the last couple of weeks.
In terms of the outlook for financials, some factors that are painting a rosy picture are a US economy – being helped by lower taxes – that is strongly expanding, a Federal Reserve that firmly remains on a rate normalization path – higher interest rates translate into higher margins for banks – and deregulation in the sector. Anything that derails the aforementioned drivers has the capacity to act as a drag on financials. As regards scaling back on regulatory hurdles stemming from the 2008 global financial crisis, the fate of such actions could well be determined by November’s mid-term elections where all seats of the House of Representatives and 33 of 100 Senate seats will be contested. Republicans losing power is seen as weakening the probability for a softer regulatory environment in the banking sector. Also of importance, especially for investment banks, is volatility making a comeback in equity markets, something which is supporting their revenues from trading, but could also hurt their underwriting & advisory business.
Morgan Stanley is an S&P 500 constituent. Year-to-date and prior to Tuesday’s US market open, the S&P is trading higher by 0.2%, with Morgan Stanley’s equivalent performance standing at 1.8%. The investment bank also outperforms the S&P 500 financial sector index which is down by 1.3% year-to-date.
From a price-to-earnings valuation perspective, Morgan Stanley’s forward P/E ratio (price over forecasted earnings) is at 11.3, roughly in line with its peer group. Analysts’ median and mean price target on the stock are at $61.00 and $61.17 respectively, pointing to upside potential relative to current valuation levels.
It should be kept in mind that the overall sentiment in equity markets could also be driven by geopolitics – developments related to the Syrian conflict – as well as any updates on global trade disputes. However, at least for now, these seem to have taken the back seat, with investors focusing on corporate earnings as the major catalyst fueling stock market movements. Analysts project Q1 profits for S&P 500 companies to jump by 18.5% relative to a year ago, this constituting the largest gain in seven years. To the extent developments on other fronts led to more conservative positioning in equity markets than justified by earnings expectations, opportunities might exist for lucrative long positions.
Lastly, it is noteworthy that Morgan Stanley rival Goldman Sachs released its respective quarterly results before today’s US market open. It managed to handily beat forecasts, with its trading division posting a notable comeback after acting to the detriment of the company’s bottom line throughout 2017. It remains to be seen whether Goldman’s release will act as a preamble for Morgan Stanley’s corresponding figures.
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