Morgan Stanley Reports Upbeat Q4 Earnings; Shares Gain

One of the top S&P 500 companies, Morgan Stanley (NYSE: MS), reported better-than-expected fourth-quarter earnings. A rise in deal volumes and elevated advisory revenues drove earnings.  

Following the news, shares of the investment bank rose 1.8% to close at $95.73 on Wednesday. 

Results in Detail 

Morgan Stanley reported adjusted earnings of $2.08 per share in the quarter, which topped the Street’s estimates of $1.83 per share and grew 8% on a year-over-year basis.  

Additionally, net revenues came in at $14.52 billion, up 7% from the prior-year quarter, but marginally missed the consensus estimate of $14.59 billion. 

Investment Banking revenues were $2.4 billion in the quarter, up 6% year-over-year, driven by outstanding performance in the advisory and fixed-income underwriting business. Additionally, Equity revenues jumped 13%, while Fixed Income recorded a fall of 31%.  

Meanwhile, Wealth Management revenues came in at $6.3 billion, up 10%, and Investment Management revenues of $1.8 billion surged 59% from the prior-year quarter. Markedly, the Eaton Vance acquisition, higher performance fees, and elevated average assets under management (AUM) drove asset management and related fees. 

On the negative side, Morgan Stanley reported total compensation expenses of $631 million, up 19% year-over-year. Additionally, provision for credit losses jumped 25% to $5 million. 

Full-year 2021 Results 

For 2021, the bank reported adjusted earnings of $8.22 per share, compared with $6.58 per share in the prior year. Total net revenue grew 23% year-over-year to $59.8 billion. 

Capital Deployment 

Morgan Stanley repurchased common stock worth $2.8 billion during the quarter. The bank’s Board announced a quarterly dividend of $0.70 per share, to be paid on February 15, 2022, to common shareholders of record as of January 31, 2022. 

CEOs Comments 

During the earnings call, looking forward, Morgan Stanley CEO James P. Gorman said, “We expect rates to rise. We expect approximately $500 million of incremental NII in Wealth Management this year based on the year-end forward curve. Additionally, we expect another $200 million this year from the reversal of fee waivers in our Investment Management business.”

Wall Street’s Take 

Following the recent Morgan Stanley earnings report, Goldman Sachs analyst Richard Ramsden reiterated a Buy rating and a price target of $118 (23.26% upside potential) on the stock. 

Though strong investment banking, investment management, and higher margins, partially mitigated by weak fixed-income net revenues, led to better-than-expected results, Ramsden expects “the focus to be more on the forward trajectory, specifically on the company’s targets (which have yet to be released), and assumptions around interest rates, wealth management flows and capital markets normalization that underlie those targets.” 

The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 7 Buys and 4 Holds. The average Morgan Stanley stock price prediction of $118.44 implies 23.72% upside potential. Shares have gained 31.2% over the past year. 

News Sentiment 

News Sentiment for Morgan Stanley is currently Very Positive, based on 112 articles over the past seven days. 91% of the articles on MS stock have a Bullish sentiment, compared to a sector average of 57%, while 9% are Bearish, compared to a sector average of 43%.

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