Morgan Stanley Jumps on Solid Earnings Beat

Morgan Stanley (NYSE: MS) reported its fourth-quarter financial results before the markets opened on Tuesday. The company had $0.43 in earnings per share (EPS) on $7.7 billion in revenue, which compares to consensus estimates from Thomson Reuters of $0.33 in EPS on revenue of $7.59 billion. In the same period of the previous year, the company posted EPS of $0.39 and $8.01 billion in revenue.

At the end of the quarter, Morgan Stanley estimates its pro forma fully phased-in Common Equity Tier 1 risk-based capital and Supplementary Leverage ratios to be roughly 14.1% and 5.8%, respectively.

The company repurchased $625 million of its common stock, or roughly 19 million shares, in the fourth quarter. Over the course of 2015, Morgan Stanley repurchased $2.1 billion of its common stock, or approximately 59 million shares.

The board of directors also declared a $0.15 quarterly dividend, payable on February 15 for common shareholders of record on January 29.

In terms of its segment performance in the fourth quarter, Morgan Stanley reported:

• Institutional Securities net revenues, excluding DVA were $3.5 billion reflecting continued strength in Equity sales and trading, solid results in Investment Banking and continued weakness in Fixed Income & Commodities sales and trading.
• Wealth Management net revenues were $3.8 billion and pretax margin was 20%. Fee-based asset flows for the quarter were $11.4 billion.
• Investment Management reported net revenues of $621 million with assets under management or supervision of $406 billion.

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James P. Gorman, chairman and CEO of Morgan Stanley, commented on earnings:

A strong overall performance in the first half of the year was impacted by difficult market conditions in the second half that dampened trading activity. In the fourth quarter we took action to meaningfully restructure our Fixed Income business on a capital and expense basis. We enter 2016 with a continued focus on managing expenses across the Firm and driving up returns for our shareholders.

Shares of Morgan Stanley closed Friday down 4.4% at $25.97, with a consensus analyst price target of $36.96 and a 52-week trading range of $25.51 to $41.04. Following the release of the earnings report, the stock was up 3.0% at $26.76 in early trading indications Tuesday.