Morgan Stanley Stock Falls Despite Earnings Easily Beating



Morgan Stanley (MS) beat first-quarter estimates Friday, as investment bankers and trading desks reaped the rewards amid booming equity-trading and IPO activity. Morgan Stanley stock dipped.


The results mark the last from the banking giants, which have reported windfalls amid spikes in volatility in stocks and bonds, while special purpose acquisition companies have flooded the market with new stocks.

Morgan Stanley Earnings

Estimates: Analysts expected EPS to jump 74% to $1.72 as revenue climbs 45% to $13.81 billion.

Results: EPS of $2.22 on revenue of $15.72 billion. But Morgan Stanley also a booked $644 million loss from a “credit event” and a $267 million in trading losses due to one client. CEO James Gorman confirmed it was the hedge fund Archegos, which imploded last month.

“I think we’ll certainly be looking hard at family office-type relationships where they are very concentrated and you have multiple prime brokers and frankly, the transparency and lack of disclosure relating to those institutions is just different from the hedge fund institutions,” he told analysts Friday.

Investment banking revenue soared 128% to $2.6 billion. Fixed income trading revenue surged 44% to $5.3 billion, and equity trading revenue climbed 17% to $2.9 billion. Wealth management revenue jumped 47% to $6 billion. Investment management shot up 90% to $1.3 billion.

The surge in trading and investment banking also came as Morgan Stanley enlarged its asset management business. On March 1, the company closed its purchase of Eaton Vance. And in October, Morgan Stanley completed its $13 billion all-stock purchase of E-Trade Financial.

Stock: Shares fell 0.4% to 80.54 on the stock market today. Morgan Stanley stock is in buy range from a buy point of 77.86 from a flat base, according to MarketSmith chart analysis. The stock is finding resistance at the 50-day line.

Morgan Stanley’s relative strength line is leveling off after declining for several weeks. Its RS Rating is 77 out of a possible 99. It has an EPS Rating of 96, as it has posted double-digit earnings growth the last three quarters.

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Top Wall Street Bank Stocks

The Morgan Stanley earnings report allows investors to size up which top bank’s trading desks performed best in Q1.

JPMorgan Chase (JPM) reported fixed income trading revenue grew 15% to $5.8 billion, and equities trading revenue jumped 47% to $3.3 billion.

Goldman Sachs (GS) said fixed income trading revenue climbed 31% to $3.89 billion, and equities trading revenue surged 68% to $3.69 billion.

Bank of America (BAC) saw fixed-income trading revenue swell 22% to $3.3 billion, with equities trading up 10% to $1.8 billion.

And Citigroup (C) reported fixed income trading fell 5% to $4.55 billion, while equities trading climbed 26% to $1.48 billion.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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