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
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
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.
Morgan Stanley (MS): Read the Full Research
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