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Morgan Stanley Restates Q3 Earnings on Additional Costs - Analyst Blog

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Morgan Stanley ( MS ) has again restated its quarter results. In its latest quarterly filing, the company disclosed the inclusion of $30 million additional expenses in third-quarter 2014. As a result, the company's earnings are lowered to 83 cents per share, down from 84 cents as reported on Oct 17.

Notably, Morgan Stanley's adjusted earnings per share from continuing operations declined by 1 cent per share to settle at 64 cents. It still remains above the Zacks Consensus Estimate of 54 cents.

Morgan Stanley included additional $30 million of expenses on failing to provide prospectuses to its mutual fund clients. Due to this failure, the company had extended to its customers an option to rescind those transactions. Earlier, the company had made a provision of $20 million in expenses.

Additionally, Morgan Stanley stated in the quarterly filing that it continues to respond to subpoenas and other legal claims from banking regulators regarding its business conduct pertaining to the sale of residential mortgage-backed securities (RMBS). Notably, the company also disclosed that some of these matters are in advanced stages of talks and could lead to settlements, going forward.

Further, owing to the change in the legal entity status of Morgan Stanley Smith Barney Holdings LLC (MSSBH) from a partnership to a corporation, the company will record a net tax benefit due to change in the tax status of MSSBH. The company had acquired MSSBH joint venture stake from Citigroup Inc. ( C ) on a gradual basis, with last 35% purchased in 2013.

This discrete net tax benefit of $1.3 billion will be recorded in the fourth-quarter 2014 earnings from continuing operations. In the two preceding quarters, Morgan Stanley had recorded discrete tax benefits of $846 million in aggregate.

Nonetheless, Morgan Stanley holds a trend of restating quarterly results. Since 2013, the company had restated its results thrice - in May 2013, Feb 2014 and Aug 2014 - on account of litigation settlements.

Currently, Morgan Stanley carries a Zacks Rank #2 (Buy). Some other finance stocks worth considering include The Goldman Sachs Group, Inc. ( GS ) and Raymond James Financial, Inc. ( RJF ). These two sport the same Zacks Rank as Morgan Stanley.

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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.


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

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