A week ago, Morgan Stanley (NYSE:MS) came out with a strong set of yearly numbers that could potentially lead to a re-rate of the stock. The company beat expectations with revenues of US$41b arriving 3.2% ahead of forecasts. Statutory earnings per share (EPS) were US$5.19, 5.8% ahead of estimates. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, Morgan Stanley's 18 analysts currently expect revenues in 2020 to be US$41.9b, approximately in line with the last 12 months. Statutory per share are forecast to be US$5.36, approximately in line with the last 12 months. In the lead-up to this report, analysts had been modelling revenues of US$40.7b and earnings per share (EPS) of US$5.18 in 2020. It looks like there's been a modest increase in sentiment following the latest results, with analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Although analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$58.02, suggesting that the forecast performance does not have a long term impact on the company's valuation There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Morgan Stanley at US$74.00 per share, while the most bearish prices it at US$43.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Further, we can compare these estimates to past performance, and see how Morgan Stanley forecasts compare to the wider market's forecast performance. We would highlight that Morgan Stanley's revenue growth is expected to slow, with forecast 1.2% increase next year well below the historical 4.1%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.1% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Morgan Stanley to grow slower than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Morgan Stanley following these results. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider market. The consensus price target held steady at US$58.02, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Morgan Stanley going out to 2022, and you can see them free on our platform here..
We also provide an overview of the Morgan Stanley Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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