Can Morgan Stanley outbeat earnings expectations again for 2Q of 2021

Morgan Stanley (NYSE: MS) is set to report its financial results for the second quarter of 2021 on Thursday, July 15. We expect Morgan Stanley to outbeat market consensus earnings expectations, while revenue is lower than expected. The company reported that its performance in the first quarter of 2021 was better than expected, with all businesses achieving positive revenue growth. Although its sales and trade banking and investment businesses are in a leading position, the bank’s asset growth in wealth management and investment management is also strong. We expect wealth management and investment businesses to continue to drive growth in the second quarter, although their sales and income from trade and investment banking may decline. A warning was sent last month by JPMorgan and Citigroup about the uncertainty in trade and investment.

What we can expect from Morgan Stanley?

We expect Morgan Stanley’s revenue for the second quarter of fiscal 2021 to be approximately $ 13.72 billion, slightly lower than the consensus estimate of $ 13.96 billion. MS’s revenue soared 16% in 2020, reaching US $ 48.2 billion, driven primarily by growth in revenue from sales and transactions and investment banking. Growth in wealth management revenue has further promoted growth. It should be noted that the total assets of wealth management clients received a substantial boost in the fourth quarter of 2020 due to the acquisition of E * TRADE. The same trend continued in the first quarter of 2021, with the institutional securities segment (sales and trading and investment banking) growing 66% year-on-year. Among them, due to the increase in transaction volume from IPOs, bulk transactions and subsequent issues, share subscription income increased 3.5 times. In addition, the investment and wealth management sector has achieved strong revenue growth driven by the flow of new assets and net commissions. In other words, due to the decrease in the volume of underwriting transactions, we expect institutional securities income to decline in the second quarter QoQ. However, all other businesses can continue their growth trajectory during the quarter.

Morgan Stanley’s adjusted earnings per share (EPS) for the second quarter of 2021 is expected to be $ 1.72, $ 4 more than the consensus estimate of $ 1.65. Due to increased revenue and decreased operating expenses as a percentage of revenue, MS profitability data has improved in 2020. The same trend will continue in the first quarter of 2021 and is expected to drive second quarter performance.
Morgan Stanley’s fiscal year 2021 net profit margin may decrease, resulting in a net profit of US $ 10.7 billion. In addition, the bank recently announced a $ 12 billion share buyback program,
which is valid for the next four quarters. This will slightly increase the MS EPS figure to $6.89 in fiscal 2021.

Technical outlook of Morgan Stanley

After plotting a new record high of $94.40, Morgan Stanley has slightly fallen back to the $90 level, but it is still in the upward price channel, maintaining a bullish momentum with the stock currently trading above $93.
The price has now broken through the resistance trend line since the beginning of June, and the price wedge completed by the April low support trend line shows a continuous upward trend; better-than-expected earnings releases should maintain the upward trend and may cause the asset to break through the previous high Point $94.40 and use it as an escape to plot a new record high.

Lulama Msungwa – Financial Market Analyst