Morgan Stanley (MS): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

By Zacks Investment Research,

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Morgan Stanley's fourth-quarter 2014 earnings from continuing operations missed the Zacks Consensus Estimate. Lower-than-expected results were due to a decrease in fixed-income, currency and commodities ("FICC") trading income and lower investment banking revenues. Further, fall in fee income and lower net revenue of all segments, except Wealth Management, added to the woes. However, these were partially offset by a drastic improvement in net interest income, a rise in advisory revenue and lower operating expenses. Also, improved asset position acted as a tailwind. After analyzing the company's results, we maintain a long term Neutral recommendation on the stock.


Founded in 1935 and incorporated under the laws of the State of Delaware in 1981, Morgan Stanley is the leading financial services holding company headquartered in New York. It provides products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. With nearly 55,977 employees, the company serves clients through more than 1,200 offices across 43 countries.

Morgan Stanley provides financial advisory and capital-raising services to a diverse group of corporate and other institutional clients globally, primarily through wholly owned subsidiaries that include Morgan Stanley & Co. Incorporated, Morgan Stanley & Co. International plc., Morgan Stanley Japan Securities Co. Ltd. and Morgan Stanley Asia Limited. These, along with other subsidiaries also conduct sales and trading activities worldwide, as principal and agent and provide related financing services on behalf of institutional investors.

The company's businesses are divided into three segments:

The Institutional Securities (IS) segment includes capital raising financial advisory services that include advices on mergers and acquisitions, restructurings, real estate and project finance corporate lending sales, trading, financing and market-making activities in equity and fixed income securities and related products, including foreign exchange and commodities benchmark indices and risk management analytics and investment activities.

The Wealth Management Group (WM) segment provides brokerage and investment advisory services covering various investment alternatives financial and wealth planning services annuity and other insurance products credit and other lending products cash management services retirement services and trust and fiduciary services and engages in fixed income principal trading.

The Investment Management (IM) segment provides global asset management products and services in equity, fixed income, alternative investments that include hedge funds and funds of funds, and merchant banking including real estate, private equity and infrastructure, to institutional and retail clients through proprietary and third-party distribution channels. The segment also engages in investment activities.

Morgan Stanley competes with commercial banks, insurance companies, sponsors of mutual funds, hedge funds and other companies that offer financial services. With increased merger and acquisition (M&A) activities in the financial space, larger companies with a wider reach and more capabilities intensify the competitive space for the company.

In Jul 2014, Morgan Stanley completed the divestiture of its ownership stake in TransMontaigne Inc., a U.S.-based oil storage, marketing and transportation company, to NGL Energy Partners LP.

In Jun 2013, Morgan Stanley acquired the remaining 35% stake in Morgan Stanley Wealth Management (MSWM) for $4.7 billion. Earlier, in Sep 2012, the company had purchased 14% stake in MSSB for $1.89 billion. In 2009, Morgan Stanley and Citigroup Inc. combined Morgan Stanley's Global Wealth Management Group and Citigroup's Smith Barney, Quilter in the U.K., and Smith Barney Australia into a joint venture (JV), called Morgan Stanley Smith Barney (MSSB). Citigroup exchanged 100% of its Smith Barney, Smith Barney Australia and Quilter units for 49% stake in the JV and an upfront cash payment of $2.7 billion. Morgan Stanley exchanged 100% of its Wealth Management business for 51% stake in the JV.

In 2012, Morgan Stanley divested its mortgage-servicing unit, Saxon Mortgage Services Inc., to Ocwen Financial Corp., for $73.8 million in cash.

In 2010, Morgan Stanley sold its retail asset management business, including Van Kampen Investments, to Invesco Ltd. The company received about 30.9 million shares of Invesco (approximately 7% non-controlling interest in the company) and $800 million in cash. The company also completed the sale of its 34.3% stake in China International Capital Corporation, generating a pre-tax profit of about $668 million.

In May 2009, Morgan Stanley divested all its remaining ownership interest in MSCI Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: WM , IM , MS

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