Morgan Stanley’s 1Q Results Beat Expectations As Revenues Surge; Shares Dip

Morgan Stanley reported better-than-expected first-quarter results. Top-line growth, driven by solid performance in all segments, was the primary driver. However, shares of the investment bank declined 2.8% to close at $78.59 on April 16.

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Morgan Stanley’s (MS) 1Q earnings of $2.19 per share topped the Street’s estimates of $1.70 per share and more than doubled on a year-over-year basis. Net revenues came in at $15.7 billion, up 60.2%, and comfortably surpassed the consensus estimate of $14.09 billion.

Investment banking revenues were $2.6 billion in the quarter, up 128% year-over-year, driven by outstanding performance in the advisory and underwriting business. Additionally, equity revenues jumped 17%, while fixed income recorded a 44% rise. Meanwhile, Wealth Management revenues came in at $6 billion, up 47%, and Investment Management revenues of $1.3 billion surged 90% from the prior-year quarter.

Morgan Stanley’s total compensation expenses jumped 58% year-over-year. Additionally, provision for credit losses recorded a benefit of $98 million, which reflected a release in the allowance for credit losses. (See Morgan Stanley stock analysis on TipRanks)

Following the 1Q results, RBC Capital analyst Gerard Cassidy increased the stock’s price target to $82 (4.3% upside potential) from $78 and maintained a Buy rating.

Cassidy said, “The global financial markets continued to be robust in 1Q21 and MS was able to harness that strength by delivering very impressive results due to its premier global banking franchise…Under the leadership of James Gorman, MS has transformed itself into a diversified broker dealer with a leading market share position in most of its businesses. The recent handling of the disclosure of its trading losses with Archegos, however, has taken some of the glow off the company.”

All of this prompted the analyst to comment, “We raised our 2021 and 2022 EPS estimates to $6.85 and $7.04 from $6.15 and $6.99, respectively, based upon MS’s recent results and our outlook for the company, as well as our expectation for a robust M&A environment and healthy capital markets levels in 2021.”

Morgan Stanley shares have exploded almost 105% over the past year, while the stock still scores a Strong Buy consensus rating, based on 10 Buys versus 3 Holds. That’s alongside an average analyst price target of $88, which implies 12% upside potential to current levels.

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Morgan Stanley, with 1.2% of investors increasing their exposure to MS stock over the past 30 days.