Morgan Stanley’s MS initiatives to cut down expenses should keep supporting its bottom-line growth. Also, it remains focused on strengthening its product portfolio.
Moreover, the company’s price performance looks impressive. Its shares have increased 23.9% in the past year, outpacing the industry’s growth of 14.3%.
However, declining net interest income and slump in trading activities remain major concerns for the company.
Its Zacks Consensus Estimate for the current-year earnings has also remained stable over the last 30 days. As a result, the stock currently carries a Zacks Rank #3 (Hold).
Looking at the fundamentals, the company is on track to reduce infrastructure expenses by 2017 through its cost-saving initiative, Project Streamline.
Moreover, for the past few years, the company has been taking a spate of initiatives to restructure its operations with the aim of lowering balance sheet risk and focusing on its less capital-intensive businesses. Its continued focus on strengthening its product portfolio is expected to support top-line growth in the quarters ahead.
Given its solid liquidity position and earnings strength, the company should be able to sustain improved capital deployments and continue enhancing shareholder value going forward.
However, the company’s net-interest income has started to witness a decline since the beginning of 2017. Despite a favorable rate environment and improving economy, the decline in net-interest income is a result of significant increase in interest expenses.
Also, a major portion of Morgan Stanley’s revenues comes from trading activities and hence its performance is largely dependent on the overall performance of the capital markets. Since the beginning of 2017, there has been a slowdown in client activity and low market volatility, which has led to a decline in fixed income trading revenues. If the slump in capital markets continues, it will adversely affect the company’s trading income.
Stocks to Consider
A few better-ranked stocks from the same space are Interactive Brokers Group, Inc. IBKR, Stifel Financial Corporation SF and Raymond James Financial, Inc. RJF, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings estimates for Interactive Brokers have been revised 5.8% upward for 2017 over the past 60 days. Its share price has risen 64% over the last six months.
Stifel Financial’s earnings estimates have been revised upward by 1.8% for the current year in the past 60 days. Also, over the last six months, its share price has increased 40.4%.
Raymond James has witnessed an upward earnings estimate revision of 1.4% for the current fiscal year over the past 60 days. Also, its share price has seen a 22.4% rise over the last six months.
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