2016 has been a brutal stretch for a number of companies in the investment world. A choppy market and a lower outlook for the number of rate hikes weighed
on most, while investment managers are facing increased pressure from robo-advisors and other, more millennial-friendly, investment avenues.
These concerns have weighed on Morgan Stanley (MS) in particular, as the stock remains under pressure in the first few months of the year. Shares are off more than 20% in the time frame which is far lower than the S&P 500’s flat performance in the time period, and even the broader financial sector’s roughly five percent loss to start the year.
And with a forward PE below 10, some investors may believe that Morgan Stanley is starting to become a value stock at these levels. However, if we look to recent earnings estimates, we can see that the path ahead for MS stock may still be lower in the near term.
Lowered Recent Estimates for Morgan Stanley
All of the recent earnings estimates for Morgan Stanley have been lower as of late, as not a single analyst in our coverage universe has raised estimates in the past two months for MS stock. This includes both the current quarter and the current year, as well as the next year time frame too. The pace of these revisions lower has been enough to push the year-over-year growth rate down to -10% for the current quarter, and just 3% for the full year. In fact, in just the past sixty days alone, estimates have tumbled 12.6% for the current quarter and over 5% for the full year.
However, this may not actually be the worst of the story, as the most recent estimates have been absolutely awful for MS stock.
The current quarter 30-Day consensus is just 55 cents a share, a far cry from the full consensus of 76 cents per share. We see a similar trend for the full year, with the 30-Day consensus coming in at just $2.41, a huge drop from previous expectations of $2.80 per share.
In other words, some of the most recent and up-to-date information on MS stock suggests that more pain is ahead for the company on the earnings front. No
wonder we have a Zacks Rank #5 (Strong Sell) and are looking for more underperformance from the company in the months ahead.
Consider This Pick in the Financial Sector
If you are set on making a play in the investment broker corner of the finance world, the pickings are pretty slim. The industry is currently ranked in the bottom 15% overall, and there are currently five times as many strong sells as there are strong buys in the group.
In fact, the only strong buy stock to note in the 25 stock group is Piper Jaffray Companies (PJC). This company is expected to see nice EPS growth this year and it has a much better track record in earnings season, at least when looking at the four most recent quarters.
So if you are seeking out a good choice in this part of the financial world, familiarize yourself with the top ranked PJC. It appears to be a good value
right now—currently has a Value Score of ‘A’—and is certainly a better choice than the still-in-trouble MS stock at this point in time.
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