Morgan Stanley (MS) reported its fiscal 4th quarter earnings today before the market opened, and despite beating revenue forecasts, the stock is down more than 3% Tuesday morning.
Revenue of $12.9 billion was a 1.2% improvement year over year, beating the FactSet consensus of $11.93 billion handsomely. Key segments in this performance were investment banking revenue (up 5%) and fixed income underwriting revenue (up 25%). Advisory and equity underwriting revenue didn’t move at all.
Despite solid revenue performance, profitability was a disappointment – down 35% year over year, and well below the FactSet consensus. Net income came in at $1.38 billion (85 cents per share) compared to $2.11 billion ($1.26 per share) this time last year.
This quarter also included a 28-cent/share charge as a result of the bank failures last year, a result of the FDIC’s special assessment. Without this, Morgan Stanley’s earnings actually would have come in ahead of the FactSet consensus of $1.07 per share with $1.13 per share. There was also a $249 million legal charge to offset performance for the quarter.
The bank’s new chief executive Ted Pick just took over and was happy with the return on average tangible equity of 12.8% last year. But, Pick also pointed to a few concerns in the road ahead. The US economy is in a tumultuous state and its future is becoming more and more uncertain. Meanwhile, intensifying geopolitical conflicts could take their toll as well.
Coming into earnings day, analysts were all over the place on their thoughts regarding MS. Price targets range from as low as $80 to as high as $103. While many still maintain their outperform rating, a few have adjusted their stance to neutral.
So, what does all this mean for MS investors as the stock is down 5% in the past week now? We’ve taken a look through the VectorVest stock analysis software and still see 3 reasons to consider this stock a buy. Here’s what you need to know…
MS Has Fair Upside Potential and Safety With Good Timing
The VectorVest system helps you win more trades with less work through a proprietary stock-rating system. It tells you everything you need to know in 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT).
These ratings are easy to interpret as each sits on its own scale of 0.00-2.00 with 1.00 being the average. Just pick stocks with ratings above the average! Better yet, follow the clear buy, sell, or hold recommendation given based on the overall VST rating for any given stock at any given time. As for MS, here’s what we’ve discovered:
- Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out) to AAA corporate bond rates and risk. It offers much better insight than a simple comparison of price to value alone. MS has a fair RV rating of 0.98, just below the average.
- Fair Safety: The RS rating is a risk indicator calculated from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. MS is a fairly safe stock with an RS rating right at the average of 1.00.
- Good Timing: This is where things get interesting, as MS still has good timing. In the past 3 months, the stock is still up more than 11% despite today’s performance. This is reflected in a good RT rating of 1.21. The rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 1.08 is fair, and enough to earn MS a BUY recommendation in the VectorVest system. But before you do anything, we encourage you to dive deeper and learn more about this opportunity with a free stock analysis today!
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VectorVest advocates buying safe, undervalued stocks, rising in price. MS is falling in today’s trading session after delivering solid revenue but lackluster profit in Q4, coupled with concerns of the future. That being said, the stock has fair upside potential and safety with good timing.
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