Morgan Stanley Stock Bullish on Gains in Stock Trading and Asset Management – Evercore ISI From Investing.com

On Thursday, Evercore ISI updated its forecast for Morgan Stanley (NYSE:) and increased its price target from $115.00 to $133.00 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 adjusted earnings per share (EPS) of $1.88, beating both Evercore ISI’s forecast and the consensus estimate, which were $1.55 and $1.59, respectively .

The company’s success was attributed to a 16% year-on-year increase in revenue and significant positive operating leverage of 500 basis points. Additionally, a robust return on tangible equity (ROTCE) of 17.5% was highlighted as a key result of the quarter.

The financial institution’s outperformance was primarily driven by a 21% year-on-year increase in stock trading and record asset management sales, which rose 14%. Transaction Strong asset management revenues, a moderate contribution from investment banking and lower non-employee costs also contributed to the positive results.

Morgan Stanley shares rose 6.5% after reporting quarterly results. The company had lagged its major bank competitors by 11 percentage points in the first nine months of the year, but was able to close that performance gap to just 200 basis points by October 16, 2024.

Morgan Stanley management observed signs of stabilization in sweep deposits, with period-end sweep deposits increasing 2% quarter-over-quarter. Although net interest income in wealth management is expected to be slightly lower in the fourth quarter, overall momentum at Morgan Stanley, improving market conditions and higher client assets are expected to drive estimates and the share price higher.

In other recent news, Morgan Stanley reported significant financial growth in the third quarter of 2024, with revenues of $15.4 billion and net income of $3 billion. The company also achieves a return on tangible equity (ROTCE) of 17.5%.

The wealth and investment management division reported record revenues of $7.3 billion and total client assets reached an impressive $7.6 billion. The company also completed $750 million in share repurchases and increased its quarterly dividend to $0.925.

Despite a slight disadvantage in deposits and a slight disadvantage in net interest income compared to the previous quarter, the company remains on a growth path. Morgan Stanley has a target of $10 billion in total client assets and expects continued growth in fee-based asset inflows. The company also expects an uptick in the IPO market and an increase in refinancing activity as interest rates decline.

Investment banking activities show promising trends with healthy pipelines and a significant increase in fixed income issuance. The company also reported robust growth in both Asia and EMEA. These are the latest developments from Morgan Stanley’s third quarter 2024 earnings call.

InvestingPro Insights

Morgan Stanley’s recent performance is consistent with several key metrics and insights from InvestingPro. The company’s market capitalization is $192.65 billion, reflecting its significant presence in the financial sector. With a price-to-earnings (P/E) ratio of 17.09, Morgan Stanley trades at a relatively moderate valuation considering its recent strong performance.

InvestingPro Tips highlights that Morgan Stanley has increased its dividend for 10 years in a row, demonstrating a commitment to shareholder returns. This is particularly notable given the company’s recent outperformance and could be attractive to income investors. Additionally, the stock’s significant return in the last week mentioned in InvestingPro Tips correlates with the 6.5% increase following the quarterly results announcement.

The company’s 9.18% revenue growth over the last twelve months, as reported by InvestingPro Data, supports the 16% year-over-year revenue increase for the third quarter mentioned in the article. This growth trajectory, combined with Morgan Stanley’s stronger position in the capital markets industry, suggests the potential for continued positive performance.

For investors seeking more comprehensive analysis, InvestingPro offers 14 additional Morgan Stanley tips that provide a deeper understanding of the company’s financial health and market position.

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