On Thursday, Evercore ISI updated its outlook on Morgan Stanley (NYSE:MS), raising the price target to $133.00 from the previous $115.00, while maintaining an Outperform rating on the stock. This adjustment follows Morgan Stanley’s strong performance in the third quarter of 2024, which exceeded analyst expectations.
Morgan Stanley reported an adjusted earnings per share (EPS) of $1.88, surpassing both Evercore ISI’s projection and the consensus estimate, which stood at $1.55 and $1.59, respectively.
The company’s success was attributed to a 16% year-over-year increase in revenue and a significant 500 basis points of positive operating leverage. Additionally, a robust return on tangible common equity (ROTCE) of 17.5% was highlighted as a key takeaway from the quarter.
The financial institution’s outperformance was largely driven by a 21% year-over-year increase in equity trading and record wealth management revenue, which rose by 14%. The wealth management division’s strong transaction revenues, a modest contribution from investment banking, and lower non-compensation expenses also contributed to the positive results.
Morgan Stanley’s stock surged by 6.5% following the announcement of its quarterly results. The firm had previously lagged behind its big bank peers by 11 percentage points over the first nine months of the year, but managed to close this performance gap to just 200 basis points as of October 16, 2024.
Management at Morgan Stanley has observed signs of stabilization in sweep deposits, with end-of-period sweep deposits growing 2% quarter-over-quarter. Despite expectations for wealth management net interest income (NII) to be modestly lower in the fourth quarter, the overall momentum at Morgan Stanley, coupled with improving market conditions and higher client asset levels, are anticipated to push estimates and the stock price higher.
In other recent news, Morgan Stanley reported substantial financial growth in its third quarter of 2024, with revenues reaching $15.4 billion and net income standing at $3 billion. The company also achieved a return on tangible equity (ROTCE) of 17.5%.
The Wealth and Investment Management division posted record revenues of $7.3 billion and total client assets reached a staggering $7.6 trillion. The company also executed $750 million in stock buybacks and raised its quarterly dividend to $0.925.
Despite a modest decline in deposits and a slight decrease in net interest income compared to the previous quarter, the company remains focused on its growth trajectory. Morgan Stanley is eyeing a target of $10 trillion in total client assets and expects continued growth in fee-based asset flows. The firm also foresees an upswing in the IPO market and an increase in refinancing activity as interest rates decrease.
Investment banking activities showed promising trends with healthy pipelines and a considerable increase in fixed income underwriting. The firm also reported robust growth in revenues in both Asia and EMEA regions. These are the recent developments from Morgan Stanley’s third quarter 2024 earnings call.
InvestingPro Insights
Morgan Stanley’s recent performance aligns with several key metrics and insights from InvestingPro. The company’s market capitalization stands at $192.65 billion, reflecting its significant presence in the financial sector. With a P/E ratio of 17.09, Morgan Stanley is trading at a relatively moderate valuation considering its recent strong performance.
InvestingPro Tips highlight that Morgan Stanley has raised its dividend for 10 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the company’s recent outperformance and could be an attractive feature for income-focused investors. Additionally, the stock’s significant return over the last week, as mentioned in the InvestingPro Tips, correlates with the 6.5% surge following the announcement of its quarterly results.
The company’s revenue growth of 9.18% over the last twelve months, as reported by InvestingPro Data, supports the article’s mention of a 16% year-over-year increase in revenue for the third quarter. This growth trajectory, combined with Morgan Stanley’s strong position in the Capital Markets industry, suggests potential for continued positive performance.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for Morgan Stanley, providing a deeper understanding of the company’s financial health and market position.
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