Morgan Stanley (NYSE: MS) is scheduled to report its fiscal Q2 2021 outcomes on Thursday, July 15. We anticipate Morgan Stanley to beat the earnings consensus estimates, whereas revenues fall in need of expectations. The agency reported higher than anticipated ends in the primary quarter of 2021, with constructive income progress throughout all companies. Whereas its gross sales & buying and selling and funding banking companies led the pack, the financial institution additionally witnessed robust asset progress in each wealth administration and funding administration segments. We anticipate the wealth and funding administration companies to proceed to drive progress within the second quarter, though its gross sales & buying and selling and funding banking revenues are prone to see some lower on a sequential foundation.
Our forecast signifies that Morgan Stanley’s valuation is round $89 per share, which is 4% lower than the present market worth of round $93. Have a look at our interactive dashboard evaluation on Morgan Stanley’s pre-earnings: What To Count on in Q2? for extra particulars.
(1) Revenues anticipated to be marginally beneath the consensus estimates in Q2
Trefis estimates Morgan Stanley’s fiscal Q2 2021 revenues to be round $13.72 billion, marginally beneath the $13.96 billion consensus estimate. MS’ top-line surged 16% in 2020, touching $48.2 billion, primarily pushed by a soar in gross sales & buying and selling and funding banking revenues. The expansion was additional complimented by an increase in wealth administration revenues. Notably, the wealth administration complete shopper belongings obtained a giant enhance from the acquisition of E*TRADE within the final quarter of 2020. The identical development continued within the first quarter of 2021 as nicely, with the institutional securities (gross sales & buying and selling and funding banking) phase posting 66% y-o-y progress. It features a 3.5x progress within the fairness underwriting revenues pushed by greater deal volumes of IPOs, blocks, and follow-on choices. Additional, the wealth and funding administration segments noticed robust income progress pushed by web new belongings and fee-based flows. That mentioned, we anticipate the institutional securities revenues to report some sequential drop in Q2 resulting from decrease underwriting deal quantity. Nevertheless, all different companies will possible proceed their progress trajectory within the quarter.
Transferring ahead, the gross sales & buying and selling and funding banking revenues are anticipated to normalize over the approaching months, with restoration within the financial system. It can possible end in stagnant progress within the institutional securities phase in 2021. On the flip facet, the wealth administration and asset administration companies are anticipated to drive progress within the 12 months. Total, the agency’s revenues are prone to contact $54.6 billion in FY2021. Our dashboard on Morgan Stanley revenues gives extra particulars on the corporate’s segments.
2) EPS prone to high the consensus estimates
Morgan Stanley’s Q2 2021 adjusted earnings per share (EPS) is predicted to be $1.72 per Trefis evaluation, 4% above the consensus estimate of $1.65. MS’ profitability figures improved in 2020, due to the upper revenues and decrease working bills as a % of revenues. The identical development continued within the first quarter of 2021 as nicely and is predicted to drive second-quarter outcomes, too.
Morgan Stanley’s web revenue margin is prone to see some lower in FY2021, leading to a web revenue of $10.7 billion. Additional, the financial institution has lately introduced a share repurchase program of $12 billion, legitimate for the subsequent 4 quarters. This can barely enhance the MS EPS determine to $6.89 in FY2021.
(3) Inventory worth estimate 4% lower than present market worth
Going by Morgan Stanley’s valuation, with an EPS estimate of round $6.89 and a P/E a number of of slightly below 13x in fiscal 2021, this interprets right into a worth of $89, which is 4% beneath the present market worth of round $93.
Observe: P/E Multiples are based mostly on Share Value on the finish of the 12 months and reported (or anticipated) Adjusted Earnings for the complete 12 months
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