Morgan Stanley Boasts ‘Strong Momentum’ After Q4 Earnings Beat

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Morgan Stanley (NYSE: MS) reported its fourth-quarter financial results before the markets opened on Thursday. The company said that it had $0.84 in earnings per share (EPS) and $9.5 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $0.77 in EPS on revenue of $9.19 billion. The same period from last year reportedly had EPS of $0.81 and $9.02 billion in revenue.

During this quarter, Morgan Stanley recorded a net discrete tax provision of $990 million, comprised of an approximate $1.2 billion net discrete tax provision as a result of the enactment of the Tax Cuts and Jobs Act, primarily from the remeasurement of certain net deferred tax assets using the lower enacted corporate tax rate.

In terms of its segments, the investment bank reported as follows:

  • Institutional Securities net revenues were $4.5 billion reflecting strength in both underwriting and equity sales and trading, with lower results in fixed income sales and trading.
  • Wealth Management net revenues were $4.4 billion and pre-tax margin was 26%.4 Fee-based asset flows for the quarter were a record $20.9 billion.
  • Investment Management net revenues were $637 million. Assets under management were $482 billion and reflect positive net flows of $23.9 billion.

At the end of the quarter, book value and tangible book value per common share were $38.54 and $33.48, respectively. Also the firm’s Common Equity Tier 1 and Tier 1 risk-based capital ratios under Standardized Approach transitional provisions were approximately 16.5% and 18.9%, respectively.

James P. Gorman, board chair and chief executive, commented:

Over the course of the full year we achieved the strategic objectives outlined two years ago. In 2017, pre-tax earnings grew by 18%, driven by a 10% increase in revenues, with growth across all our business segments. This, coupled with strong expense discipline demonstrates the Firm’s operating leverage. We enter 2018 with strong momentum aided by rising interest rates, tax reform and an evolving regulatory framework.

Shares of Morgan Stanley closed Wednesday at $55.35, with a consensus analyst price target of $58.22 and a 52-week range of $40.06 to $55.98. Following the announcement, the stock was up about 1.5% at $56.17 in early trading indications Thursday.