Morgan Stanley (NYSE: MS) – Q1 FY 2011 Earnings Preview
Wednesday, April 20, 2011 6:00 PM

Global financial services firm Morgan Stanley (NYSE: MS) is expected to report its first quarter FY 2011 earnings on April 21, 2011. In the last four quarters ended December 2010, the company's reported EPS exceeded analysts' consensus estimates in quarters ended March 2010, June 2010 and December 2010, by margins of 80.70 percent, 73.90 percent and 16.20 percent, respectively. For the quarter ended September 2010, the reported EPS missed analysts' consensus estimate by a margin of 66.70 percent.

For the first quarter, analysts' EPS estimates range from a low of $0.02 to a high of $0.80 per share, compared with consensus estimates of $0.42 per share to $1.03 per share in the year ago quarter. For this quarter, analysts' revenue estimates range from a low of $7.17 billion to a high of $9.07 billion, compared with a consensus estimate of $7.99 billion to $9.08 billion in the same quarter a year ago. For the quarter ended March, 2011, the consensus EPS forecast has been decreased from $0.71 per share estimated 60 days ago to the current estimate of $0.42 per share.

In the last 52 weeks, Morgan Stanley's stock has been trading in the range of $22.40 to $32.29. The last trading price of the stock was $26.81 on April 12. During the first quarter, MS was upgraded to overweight by analysts at William Blair.

Morgan Stanley is a global financial services firm that maintains market positions in each of its three primary businesses: securities, asset management, and credit services. The company provides its products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals.

In the fourth quarter of 2010, Morgan Stanley reported net revenue of $7.8 billion, up 14 percent compared with net revenue of $6.8 billion in the same quarter last year. Net income applicable to Morgan Stanley's common shareholders for the quarter was $600 million, or $0.41 per diluted share, up 60 percent and 41 percent, respectively, compared with net income of $376 million, or $0.29 per diluted share, for the same quarter previous year.

During the first quarter of FY 2011, Morgan Stanley' board of directors declared a quarterly dividend per common share of $0.05. The company also announced that the a quarterly dividend of $255.56 per share of series A floating rate non-cumulative preferred stock (represented by depositary shares, each representing 1/1,000th interest in a share of preferred stock and each having a dividend of $0.25556); a quarterly dividend of $25.00 per share of series B non-cumulative non-voting perpetual convertible preferred stock and a quarterly dividend of $25.00 per share of series C non-cumulative non-voting perpetual preferred stock.

In an update by Goldman Sachs Group Inc. (NYSE: GS), Goldman Sachs cut its first quarter earnings estimate for Morgan Stanley by 60 percent on expectations of lower interest rate, credit, and currency trading revenue. However, analysts' seems to believe that the company could beat the consensus estimate by more than 50 percent for the first quarter, as the bank weathers a slowdown in trading and fewer borrowers default on credit loans.

Morgan Stanley's biggest competitor is Goldman Sachs Group Inc. (NYSE: GS). In the trailing 12 months period, Goldman Sachs reported EPS of $13.18 per share on total revenues of $39.16 billion, with quarterly revenue growth of negative (10.10 percent.). On the other hand, Morgan Stanley reported EPS was $2.63 per share on total revenues of $31.73 billion, with quarterly revenue growth of 30.10 percent.

Morgan Stanley has a total market capitalization of $40.54 billion. The company has a P/E ratio of 10.37, lower than the industry's average P/E of 20.50. The P/B ratio of the company is at 0.86, compared with the industry's P/B ratio of 2.18. Net profit margin of Morgan Stanley is 10.53 percent, slightly lower than industry's average net profit margin of 11 percent. The return on equity or ROE of the company is 9.24 percent, higher than the industry's ROE of 7.40 percent.



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