Morgan Stanley shares gain the most in nearly two years on Tuesday, quarterly earnings top estimates as equity trading, equity underwriting support

October 17, 2018 9:20 am

Morgan Stanley’s (MS) quarterly earnings, reported on Tuesday, outstripped Wall Street estimates, supported by strong revenue growth in the lender’s equity trading and equity underwriting businesses.

Morgan Stanley shares closed higher for a second consecutive trading session in New York on Tuesday. It has also been the sharpest daily surge since November 9th 2016. The stock went up 5.68% ($2.47) to $45.94, after touching an intraday high at $46.20, or a price level not seen since October 10th ($46.41).

Shares of Morgan Stanley have retreated 12.45% so far in 2018 compared with a 5.10% gain for the underlying index, S&P 500 (SPX).

In 2017, Morgan Stanley’s stock surged 24.19%, thus, it outperformed the S&P 500, which registered a 19.42% return.

Morgan Stanley’s total revenue went up 7.6% year-on-year to $9.9 billion during the quarter ended on September 30th, as its sales and trading revenue grew 6.9% to $3.1 billion. The latter outperformed sales and trading revenues reported by Citigroup Inc and J.P. Morgan Chase & Co.

The bank’s revenue from equity trading surged 7% year-on-year during the latest quarter, while its revenue from bond trading went up 1% year-on-year.

Morgan Stanley’s investment banking revenue increased 15.4% year-on-year to $1.5 billion during the third quarter, as its equity underwriting revenue soared 61.5% to $441 million, mostly driven by stronger revenues on IPOs and convertible offerings.

Meanwhile, net income attributable to the bank’s common shareholders went up to $2.11 billion ($1.17 per share) during the quarter ended on September 30th, from $1.78 billion ($0.93 per share) during the same period a year earlier. In comparison, analysts on average had expected earnings of $1.01 per share.

“Despite the seasonal summer slowdown in the third quarter, we reported solid revenue and earnings growth demonstrating the stability of the franchise. Year to date, we have produced an ROE of 13% and ROTCE of 15%. We remain well positioned and optimistic for the remainder of the year,” James Gorman, Morgan Stanley’s Chairman and Chief Executive, said in a statement.

According to CNN Money, the 27 analysts, offering 12-month forecasts regarding Morgan Stanley’s stock price, have a median target of $60.00, with a high estimate of $72.00 and a low estimate of $50.00. The median estimate represents a 30.61% upside compared to the closing price of $45.94 on October 16th.

The same media also reported that 16 out of 29 surveyed investment analysts had rated Morgan Stanley’s stock as “Buy”, while 11 – as “Hold”.

Weekly Pivot Levels

By using the traditional method of calculation, the weekly levels of importance for Morgan Stanley (MS) are presented as follows:

Central Pivot Point – $44.51
R1 – $46.14
R2 – $48.85
R3 – $50.48
R4 – $52.11

S1 – $41.80
S2 – $40.17
S3 – $37.46
S4 – $34.75

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