Morgan Stanley is set to report its first-quarter 2021 earnings before the market open today. Morgan Stanley is a leading global financial services firm providing investment banking, securities, wealth management and investment management services. Similar to the fourth quarter of 2020, despite the coronavirus pandemic and the vaccination breakthroughs, the Morgan Stanley report could beat markets’ revenue and earnings estimates thanks in part to a strong wealth management and lots of action in the capital markets. Over the last 2 years, MS has beaten EPS estimates 88% of the time and has also beaten revenue estimates 88% of the time.
Hence Morgan Stanley ıs expected to follow Citigroup and Bank of America, which nearly doubled their quarterly profits based on a decline in bad loan provisions and, of credit losses strong trading and large reserve releases amid the global economic recovery story. The company’s advisory fee is likely to have also been positively impacted in the to-be-reported quarter of Morgan Stanley’s equity, and fixed income markets revenues are expected to have improved. Additional reasons that could support a positive reading today are the massive government stimulus and the near-zero interest rate environment, as these are likely to have aided Morgan Stanley’s debt underwriting fees, which account for more than 50% of their total underwriting fees. Something that also helped the company in Q4 2020.
Nevertheless, according to Eikon Reuters and Zacks, Morgan Stanley is expected to earn $1.70/share on $14.09 billion in revenue. This would represent year-over-year growth of 32%. Meanwhile, the Eikon Reuters Estimate for revenue is projecting the majority of the revenue as coming from institutional securities. The key question this quarter is whether the earnings report breakdown will show steady growth in regards to its returns on tangible common equity at 17% or move higher.
Technical Analysis
Morgan Stanley hit a yearly high of $91.31/share in 2020 while it is currently trading within the $86.62 territory. The share price has been on a rally since March 2020. From the technical perspective, the stock’s outlook remains strongly bullish, however some consolidation was seen at the end of December 2020 and the end of March 2021 on the overbought performance. The price is positioned well above the 20-, 50- and 200-Day Moving Averages, while momentum is positive as RSI and MACD are positively configured in the medium term, as the near term outlooks are set at neutral, correcting the OB conditions of the asset.
The stock is prone to big moves after reporting earnings and could easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock could easily gap down.
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Andria Pichidi
Market Analyst
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