3 Morgan Stanley Analysts Break Down Q4 Earnings: 'Several Noisy Items'

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Shares of Morgan Stanley (NYSE: MS) declined in pre-market trading on Wednesday, after the company reported a decline in its fourth-quarter net profit.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

  • BMO Capital Markets analyst James Fotheringham maintained an Outperform rating, while raising the price target from $106 to $107.
  • Oppenheimer analyst Chris Kotowski reiterated an Outperform rating, while raising the price target from $106 to $107.
  • JMP Securities analyst Devin Ryan reaffirmed a Market Outperform rating on the stock.
BMO Capital Markets: Morgan Stanley's higher-than-expected wealth management revenues and investment banking fees, along with slightly lower credit costs, more than offset its lower-than-anticipated trading revenues and higher compensation costs in the fourth quarter, Fotheringham said in a note.

"Relative to reported EPS of $0.85, we calculate $1.21 core after adjusting for the block trade settlement (+$0.14), FDIC special assessment (+$0.13), and a higher-than-normal tax rate (+$0.08)," the analyst wrote. "Given rate headwinds and growth investments, MS now expects near-term WM pre-tax margins in the mid-20% range," he added.

Oppenheimer: Morgan Stanley's earnings miss came from "the expense side of the ledger," as total revenues of $12.9 billion were above the estimate of $12.7 billion, but expenses, excluding charges, were $348 million higher than expected, Kotowski said.

"While not a cause for celebration, expense wiggles like this are reasonably common, and especially so in fourth quarter results," the analyst stated. "We would put full year 2023 core operating ROTCE at around 14%, and that is not a bad performance for what to us feels like the bottom of the investment banking cycle," he added.

JMP Securities: Morgan Stanley's earnings miss included "several noisy items," while the core business performed "roughly in line with our expectations," Ryan wrote in a note.

"Bottom line, we were encouraged to hear Ted Pick kick off his management tenure with optimism around the positioning of the franchise longer term, the focus on durability and resiliency, and even some of the positive business momentum as 2024 commences," he added.

MS Price Action: Shares of Morgan Stanley declined by 1.14% to $84.99 in premarket trading on Wednesday.