Morgan Stanley's Earnings Forecast and Market Positioning

Author: Owen Jenkins Updated: 10-15-2024 03:51 AM

Morgan Stanley Earnings Expectations

Morgan Stanley (NYSE: MS) is set to release its financial results for the third quarter of 2024 soon. Analysts have a positive outlook, predicting a net revenue of around $14.4 billion that could translate to an earnings per share (EPS) of $1.58, indicating year-on-year growth of 9% and 14%, respectively.

In the preceding quarter, Q2 2024, the company experienced notable success, with net revenue climbing by 12% and EPS growth soaring to 47%. The rise in management fees, which grew by 16%, largely contributed to this success, particularly in the Institutional Securities segment, which stood out during that period. It’s worth noting that while Wealth Management achieved an operating margin of 27%, it still fell short of the management's ambitious target of 30%.

Performance and Future Projections

Looking ahead, the expectations for the entirety of 2024 involve a projected EPS increase of 24%, driven by a 9% growth in revenue. This is largely due to Morgan Stanley's strategic division of its operations into brokerage and wealth management, separating these from the traditional investment banking services.

The latter half of 2024 is anticipated to see substantial growth in investment banking fees, with one analytics firm forecasting a year-on-year growth of 48%, which contrasts with a 32% growth in the first half of the year. This projection adds to the optimism surrounding Morgan Stanley's earnings potential.

Valuation Insights

Currently, Morgan Stanley is trading at 16 times its anticipated EPS of between $6.95 and $7.00 for 2024, representing a year-on-year growth of 28%. Over the next three years, a moderate average EPS growth of 16% is projected. The estimated price-to-earnings ratio, based on a stock price of $110, is about 14 times earnings, suggesting that MS is relatively affordable from a price-to-earnings-to-growth standpoint.

From a technical viewpoint, the stock recently broke out to a four-year high, signaling potential investor confidence and positive market sentiment.

Competitive Edge in Wealth Management

In comparison to its main competitor, Goldman Sachs (NYSE: GS), my view is that Morgan Stanley has demonstrated superior management and execution in the wealth management sector over the past decade or so. Recently, there was a sell-off of Goldman Sachs shares from client portfolios, albeit from a minor portion of holdings. Even as Goldman is anticipated to report decent earnings shortly, the trend indicates that clients may increasingly favor Morgan Stanley going forward.

Both financial institutions have received a "narrow moat" rating from analysts at Morningstar. However, due to Morgan Stanley's stronger performance in wealth management, it is expected to experience more stable earnings growth and maintain its value more effectively during downturns in the market.

Frequently Asked Questions

What are the expected earnings for Morgan Stanley in Q3 2024?

Analysts predict Morgan Stanley will report $14.4 billion in net revenue with an EPS of $1.58 for Q3 2024.

How did Morgan Stanley perform in Q2 2024?

In Q2 2024, Morgan Stanley saw a net revenue increase of 12% and a remarkable EPS growth of 47% driven by a rise in management fees.

What is the growth projection for Morgan Stanley in 2024?

For the full year 2024, Morgan Stanley aims for a 24% increase in EPS based on 9% revenue growth.

How does Morgan Stanley's valuation compare with its earnings?

Morgan Stanley is currently valued at 16 times its expected EPS of $6.95-$7.00 for 2024.

Why might investors prefer Morgan Stanley over Goldman Sachs?

Investors may favor Morgan Stanley due to its better execution in the wealth management business and its favorable earnings growth outlook.

About The Author

Hi there I'm 38-year-old author and financial consultant Owen Jenkins. Having worked in the financial sector for more than ten years, I am well-versed in the subtleties and complexity that mold our financial environment. Following a degree in finance, I worked in a number of financial institutions honing my abilities in market analysis, financial planning, and investment strategies.

My love is teaching others about investing and personal finance. My goal in writing many books and articles has been to demystify financial ideas and give readers the information they need to make wise financial decisions. I write with a direct, useful style that emphasizes doable suggestions for daily living.

Along with writing, I lead webinars and seminars where I impart knowledge on how to successfully negotiate the financial world. I also write for financial journals and show up as a guest expert on financial news programs a lot. Whether they are new to investing or want to improve their approach, my mission is to enable people to take charge of their financial futures.

Beyond work, I like to hike, play the guitar, and spend time with my family. I think that balance is crucial and want to encourage people to strike a balance between their financial aspirations and their hobbies. I want to help people succeed and achieve financial security through my work, so having a good influence.

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