On Mar 7, 2014, we issued an updated research report on
). This leading financial services holding company recently
reported better-than-expected fourth-quarter 2013 results.
Results were aided by top-line growth and improved asset
position, which were partially offset by higher operating
expenses and decline in Fixed Income & Commodities sales and
trading results. Though the company exhibits strong fundamentals,
we remain cautious due to the macroeconomic headwinds across the
Morgan Stanley reported fourth-quarter 2013 adjusted earnings of
50 cents per share, beating the Zacks Consensus Estimate by
13.6%. Notably, earnings from continuing operations fell 79% year
over year to 7 cents per share owing to mounting legal reserves
of $1.2 billion.
Morgan Stanley's performance in 2013 seemed impressive as evident
from its earnings history. The company delivered positive
earnings surprises in all 4 quarters of 2013.
Amid the challenging macroeconomic environment, Morgan Stanley
enjoys a competitive edge over its peers due to consistent growth
in its core Institutional Securities' franchise. Moreover, in the
last few quarters, the company undertook restructuring activities
to reduce balance sheet risks and maintain stable earnings.
Further, Morgan Stanley's recent announcement to vend its Global
Oil Merchanting Unit enhances its strategy of shedding non-core
operations and driving earnings from more profitable core
However, despite adequate positives, Morgan Stanley's top-line
growth is expected to be sluggish in the next few quarters owing
to its increased cost structure. Moreover, significant exposure
in structured investment vehicles, commercial mortgage-backed
securities and commercial real estate sector might limit earnings
growth, given the current economic uncertainty.
Further, over the last 60 days, the Zacks Consensus Estimate for
2014 declined nearly 2% to $2.46 per share while it was down 1.3%
to $3.00 per share for 2015.
Morgan Stanley now carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Stocks that are worth considering in the Investment Brokerage
Investment Technology Group Inc.
Piper Jaffray Companies
). All these have a Zacks Rank #1 (Strong Buy).
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