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Category: Stock Market and Morgan Stanley
Date: 17 January 2020 Stock Price: $56.44 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Morgan Stanley, a diversified financial services provider. The stock of Morgan Stanley surged following the release of their 4th quarter 2019 earnings report.
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About Morgan Stanley
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in more than 41 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals
Overview of Morgan Stanley's 4th quarter 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Total revenue: $10.857 billion (up from $10.032 billion for the same period of the previous year)
- Total revenue increased by 8% over the last 12 months
- Total noninterest expenses: $8.124 billion (up from $7.322 billion for the same period of the previous year)
- Total noninterest expenses increased by 11% over the last 12 months
- Net income: $2.085 billion (up 1% from $2.060 billion for the same period of the previous year)
- Diluted earnings per share: $1.30 (up 63% from $0.80 for the same period of the previous year)
- PE ratio of Morgan Stanley: 12.05
- Dividend yield of Morgan Stanley: 2.14%
- Diluted weighted-average shares outstanding: 1.602 billion (down 6% from 1.705 billion for the same period of the previous year)
- Book value per share: $45.82 (up 8.6% from $42.20 for the same period of the previous year)
- Loans net of allowances for losses: $261.7 billion
- Loans net of allowances makes up 29.2% of Morgan Stanley's total assets
- Goodwill: $9.249 billion
- Goodwill makes up 1.03% of Morgan Stanley's total assets
- Goodwill per stock: $5.78
- Stockholders equity in Morgan Stanley: $63.780 billion
- Stockholders equity per share: $39.81
- So Morgan Stanley is trading a 1.41 times its stockholders equity which is well outside the expected range of between 2 and 4 which most firms tend to trade at.
Morgan Stanley's management commentary on their 4th quarter 2019 earnings report
NEW YORK, January 16, 2020 – Morgan Stanley (NYSE: MS) today reported net revenues of $10.9 billion for the fourth quarter ended December 31, 2019 compared with $8.5 billion a year ago. Net income applicable to Morgan Stanley was $2.2 billion, or $1.30 per diluted share,1 compared with net income of $1.5 billion, or $0.80 per diluted share,1 for the same period a year ago.
James P. Gorman, Chairman and Chief Executive Officer, said, “We delivered strong quarterly earnings across all of our businesses. Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income. This consistent performance met all of our stated performance targets.”
• The Firm repurchased $1.5 billion of its outstanding common stock during the quarter as part of its Share Repurchase Program. During the year ended December 31, 2019, the Firm repurchased $5.4 billion of its common stock or approximately 121 million shares.
• The Board of Directors declared a $0.35 quarterly dividend per share, payable on February 14, 2020 to common shareholders of record on January 31, 2020.
• The effective tax rate for the current quarter was 15.7% and the full year was 18.3% which included intermittent net discrete tax benefits of $158 million and $348 million, respectively. The effective tax rate in the prior year quarter was 16.2% and the full year was 20.9%, which included intermittent net discrete tax benefits of $111 million and $203 million, respectively. The intermittent net discrete tax benefits in the current and prior year periods were primarily associated with remeasurement of reserves as a result of new information pertaining to the resolution of multi-jurisdiction tax examinations and other tax matters.
• The Firm repurchased $1.5 billion of its outstanding common stock during the quarter as part of its Share Repurchase Program. During the year ended December 31, 2019, the Firm repurchased $5.4 billion of its common stock or approximately 121 million shares.
• The Board of Directors declared a $0.35 quarterly dividend per share, payable on February 14, 2020 to common shareholders of record on January 31, 2020.
• The effective tax rate for the current quarter was 15.7% and the full year was 18.3% which included intermittent net discrete tax benefits of $158 million and $348 million, respectively. The effective tax rate in the prior year quarter was 16.2% and the full year was 20.9%, which included intermittent net discrete tax benefits of $111 million and $203 million, respectively. The intermittent net discrete tax benefits in the current and prior year periods were primarily associated with remeasurement of reserves as a result of new information pertaining to the resolution of multi-jurisdiction tax examinations and other tax matters.
Morgan Stanley (NYSE: MS) stock price history
The image below, obtained from Google, shows the stock price history of Morgan Stanley over the last 5 years. And it's been a good time for Morgan Stanley stockholders. 5 years ago the stock was trading at around $35.15 a stock and its currently trading at $56.44 a stock. That's a significant return of 60.6% provided to Morgan Stanley stockholders over the last 5 years.
The stock of Morgan Stanley is trading at very close to its 52 week high of $57.36 and is far away from its 52 week low of $38.76 which to us is a clear indication that the short term sentiment and momentum of Morgan Stanley's stock is very positive
The stock of Morgan Stanley is trading at very close to its 52 week high of $57.36 and is far away from its 52 week low of $38.76 which to us is a clear indication that the short term sentiment and momentum of Morgan Stanley's stock is very positive
Recent coverage of Morgan Stanley
The extract below discusses the latest regarding Morgan Stanley as obtained from Investmentnews.com
A year ago, Morgan Stanley said it was buying Solium Capital Inc.’s stock plan business for $900 million in a bid to add younger clients and tech startups to its stock-plan administration business.
On Thursday morning, the wirehouse firm said it had set a goal to convert one million of those stock-plan investors to wealth-management relationships over the next five to seven years, through a variety of offerings on Morgan Stanley’s expanding platform. So far, the firm has moved just 5,000 of the stock-plan clients to wealth management, according to a strategic update presentation the firm released early Thursday as part of its fourth-quarter and full-year 2019 earnings.
The focus on the stock-plan clients comes as the firm drives its advisers to use technology to chase trillions of dollars in customer assets held outside the firm. Like Merrill Lynch and UBS, Morgan Stanley a few years ago said it was cutting back drastically on recruiting experienced financial advisers, which is costly and labor-intensive, and instead focusing more on growing the annual revenues of its current roster of brokers and advisers through technology and training.
For example, along with last year’s acquisition of Solium Capital, Morgan Stanley said in September that it was adding more services for 401(k) participants and other workplace clientele as part of a plan to leverage its workplace access to grow its wealth management business as it seeks to build out more services for participants and become a sort of one-stop shop for their financial lives.
“We think this a very interesting space,” said CEO James Gorman on a conference call with analysts Thursday when asked about the stock-plan business, which is marketed as Shareworks by Morgan Stanley. He said it was part of the firm’s move to drive its digital platform and expand its universe of clients.
To that end, Morgan Stanley said that 90% of its financial adviser teams are using digital tools.
Read the full article here
A year ago, Morgan Stanley said it was buying Solium Capital Inc.’s stock plan business for $900 million in a bid to add younger clients and tech startups to its stock-plan administration business.
On Thursday morning, the wirehouse firm said it had set a goal to convert one million of those stock-plan investors to wealth-management relationships over the next five to seven years, through a variety of offerings on Morgan Stanley’s expanding platform. So far, the firm has moved just 5,000 of the stock-plan clients to wealth management, according to a strategic update presentation the firm released early Thursday as part of its fourth-quarter and full-year 2019 earnings.
The focus on the stock-plan clients comes as the firm drives its advisers to use technology to chase trillions of dollars in customer assets held outside the firm. Like Merrill Lynch and UBS, Morgan Stanley a few years ago said it was cutting back drastically on recruiting experienced financial advisers, which is costly and labor-intensive, and instead focusing more on growing the annual revenues of its current roster of brokers and advisers through technology and training.
For example, along with last year’s acquisition of Solium Capital, Morgan Stanley said in September that it was adding more services for 401(k) participants and other workplace clientele as part of a plan to leverage its workplace access to grow its wealth management business as it seeks to build out more services for participants and become a sort of one-stop shop for their financial lives.
“We think this a very interesting space,” said CEO James Gorman on a conference call with analysts Thursday when asked about the stock-plan business, which is marketed as Shareworks by Morgan Stanley. He said it was part of the firm’s move to drive its digital platform and expand its universe of clients.
To that end, Morgan Stanley said that 90% of its financial adviser teams are using digital tools.
Read the full article here
Morgan Stanley (NYSE: MS) latest stock valuation
So what is Morgan Stanley stock worth based on the release of their 4th quarter 2019 and full fiscal 2019 earnings earnings report? Based on Morgan Stanley's latest earnings report our valuation models provide a target (full value) price for Morgan Stanley stock at $70.60 a stock. We therefore believe that the stock of Morgan Stanley is undervalued at its current price of $56.44
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $70.60. Therefore we believe a good entry point into Morgan Stanley stock is at $63.50 or below. Since the stock of Morgan Stanley is trading at well below our suggested entry point we rate the stock of Morgan Stanley as a buy
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $70.60. Therefore we believe a good entry point into Morgan Stanley stock is at $63.50 or below. Since the stock of Morgan Stanley is trading at well below our suggested entry point we rate the stock of Morgan Stanley as a buy
Next earnings release date for Morgan Stanley
It is expected that Morgan Stanley (NYSE: MS) 1st quarter 2020 earnings report will be released in the middle of April 2020