Morgan Stanley (NYSE:MS) stock has underperformed the broader market in 2015, losing about 5% year-to-date as the S&P 500 eked out a 1% gain. But Morgan Stanley might be reversing course, as a strong first-quarter earnings report sent MS stock more than 2% higher in early Monday trading.
Morgan Stanley, which beat consensus estimates for both revenue and earnings per share, is merely the most recent big-name financial to report impressive first-quarter results.
In an article I wrote last week lauding Blackstone Group LP (NYSE:BX) stock after the asset manager posted a blowout first-quarter of its own, I noted that the financial industry was making a habit of topping Wall Street expectations this earnings season:
“Blackstone stock’s outperformance affirms a strong trend developing thus far this earnings season: Financials are killing it. JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), and Citigroup Inc (NYSE:C) each independently reported earnings per share beats this week alone.”
Last week also saw New York’s Goldman Sachs Group Inc (NYSE:GS) easily exceed both revenue and EPS estimates, sending GS stock nearly 2% higher on the news.
It was a sudden surge in trading revenues that helped Goldman top first-quarter estimates, and that fact alone, according to Richard Saintvilus at TheStreet, boded well for MS stock going into today’s report:
“Why? For starters, Morgan Stanley’s trading prowess is one of its key differentiators from competitors such as JPMorgan Chase (JPM) and Citigroup (C).
In 2014, for instance, Morgan Stanley was tops among all of the investment banks in terms of equity trading revenue, generating $6.9 billion for the year, slightly ahead of Goldman Sachs at $6.7 billion …”
He was right. In the first quarter, Morgan Stanley posted revenue of $9.78 billion and adjusted earnings of 85 cents per share. Both figures were stronger than the $9.17 billion in revenue and 78 cents in EPS that Wall Street expected.
GS turned out to be a reliable forward indicator for MS stock, as Morgan Stanley witnessed a 31% jump in revenue from its equities trading division as it went on to report its best quarter in years. Overall, trading revenues were up 26%, vs. 23% year-over-year growth at Goldman.
While MS stock is a good way to bet on volatility — traders thrive in volatile markets — Morgan Stanley also has a strong wealth management division, which posted record revenues in the first quarter of $3.83 billion. The investment bank, like most if not all of its true peers, also has an M&A division that’s thriving in the current market. MS made 40% more as an M&A adviser in the first quarter than it did in the same quarter last year.
All in all, not a lot to complain about with Morgan Stanley’s report. Perhaps investors will see the light and get back behind MS stock as financials finish up a strong quarter across the board.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.
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