Morgan Stanley (NYSE:MS) defied analyst predictions to release its quarterly results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 9.8% to hit US$12b. Morgan Stanley also reported a statutory profit of US$1.66, which was an impressive 31% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Morgan Stanley after the latest results.
Following the recent earnings report, the consensus from 22 analysts covering Morgan Stanley is for revenues of US$44.5b in 2021, implying a small 2.0% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to drop 14% to US$5.14 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$43.4b and earnings per share (EPS) of US$5.07 in 2021. There doesn't appear to have been a major change in sentiment following the results, other than the small lift in revenue estimates.
It may not be a surprise to see thatthe analysts have reconfirmed their price target of US$60.58, implying that the uplift in sales is not expected to greatly contribute to Morgan Stanley's valuation in the near term. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Morgan Stanley at US$78.00 per share, while the most bearish prices it at US$45.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 2.0% revenue decline a notable change from historical growth of 5.3% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.9% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Morgan Stanley is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. The consensus price target held steady at US$60.58, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Morgan Stanley going out to 2024, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Morgan Stanley (at least 2 which are a bit unpleasant) , and understanding these should be part of your investment process.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.