Morgan Stanley Q3 2021 Earning Preview

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Morgan Stanley, the American multinational investment bank and financial services company which provides investment banking, securities, wealth management and investment management services is expected to report its third-quarter earnings today (14 October). Having failed to beat estimates only twice since the start of 2018, expectations once again are for another beat, as Zacks’ most accurate estimate expects Earnings at 1.7% per share, up 6.92% for the year-ago period, and Zacks’ consensus estimates for revenue holds at $13.85 billion, up 18.82% from Q3 2020.

Morgan Stanley is currently in the middle of a $12 billion share repurchase plan, having increased its common stock dividend by 100% after the positive stress test results by the Federal Reserve. The Bank expects more stable and durable earnings going forward and believes that the global franchise is well positioned to drive further growth – citing comments from Chairman and Chief Executive Officer James P. Gorman after they delivered solid Q2 numbers. For the entire year, the $177.51B in market cap company still holds a bullish sentiment as analysts expect a solid 57.79B in revenue (19.90% y/y growth) and 7.54 EPS (14.59% y/y growth) which is the highest EPS estimate over the last 7 years.

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This quarter’s estimate is down from Q2 2021, which printed $1.89 EPS and $15.1B in revenue. Considering the incoming tapering by the FED from its extraordinary monetary stimulus, the 4.7 million fall in Hedge Funds holdings of the MS shares to 47.1 million in the last quarter, which followed an even bigger fall from Q1 to its lowest level since the start of 2020 according to TipRanks, and a #3 Hold ranking by Zack’s, one cannot ignore the risk of a fall in price towards year end even if it beats estimates. Remember that subsequent comments from the company after the release may determine the sustainability of any immediate price reaction where a beat would likely support price while a miss would likely pressure price.


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On a broader scale, markets have been troubled over the last couple of weeks as inflationary pressures, Evergrande coupon misses, the energy crisis, supply chain disruption etc continue to cloud sentiment, which is evident in recent price action on the major stock market indices – the US500 is down about 5% since the start of September. If this persists, it could spill over further into individual stock names like Morgan Stanley before year-end and, considering the solid gains in the equity space all through the year, profit taking could come into the mix and further exacerbate this recent weakness.

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Having failed to break the new ATH created in Q3 around late August, #Morgan has pared about 9% of its gains since the start of the quarter and the stock is now trapped within a range since early August between 96.00 and 106.00. After the death cross last week on the daily chart, price currently trades below both its 20-day SMA and 50-day SMA maintaining a bearish bias further stressed by the MACD as the histogram and the signal line are both below the zero line. The RSI also adds to the woes for #Morgan as it currently trades below the halfway 50 line. However, the 96.00 level could serve as near term support and if broken, 94.80 will be the next line of defence after which we might be in for a free fall. A solid earnings report followed by bullish comments from the bank could see #Morgan use 96.00 as a spring board back towards the upper end of the range.

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