Morgan Stanley (NYSE: MS) stock gained 3.6 percent on Wednesday morning after the investment bank reported better-than-expected second-quarter earnings. The beat was driven by strength in the company’s institutional securities division, but Morgan Stanley earnings revealed mostly solid numbers across the board.
Morgan Stanley reported adjusted second-quarter earnings per share of $1.30 on revenue of $10.6 billion. Both numbers exceeded consensus analyst estimates of $1.11 and $10.1 billion, respectively. Revenue was up 12 percent from a year ago.
MS also reported $2.5 billion in equities revenue, ahead of analyst estimates of $2.29 billion. The bank’s bond-trading revenue of $1.4 billion topped Wall Street expectations of $1.29 billion as well.
[Read: Mid-2018 Outlook for Bank Stocks: Top Risks and Catalysts.]
Investment banking revenue was $1.7 billion, compared to the consensus $1.54 billion estimate, completing the trifecta.
“We reported robust revenue and earnings growth this quarter with strength across all businesses and geographies,” CEO James Gorman says in a statement. “Our strong global franchise positions us well to continue to grow organically across each of our businesses and to deliver operating leverage.”
While Morgan Stanley’s overall numbers were strong, there were also areas of weakness. Wealth management revenue of $4.3 billion missed consensus estimates of $4.43 billion. The relatively small investment management division reported $691 million in revenue, short of the $707.9 million analysts had anticipated.
Morgan Stanley also committed $1.25 billion to buying back 24 million shares of MS stock in the second quarter. The company has now bought back 46 million shares of stock this year.
Bank of America analyst Michael Carrier says Morgan Stanley’s earnings report exceeded his expectations.
“Overall, a solid quarter for MS, and while a beat driven by IS may not be viewed as sustainable, given healthy growth trends across segments, operating leverage, and cost/capital management, we like the risk/reward,” Carrier says.
He says Morgan Stanley’s return on equity of 13 percent was on the high end of its target range between 10 and 13 percent, and it could drift even higher in coming quarters.
“We see the potential for ROEs to rise to 13 to 15 percent from stronger revenues/rising rates, operating leverage, and loosening regulations/higher payouts,” Carrier says.
[Read: 5 of the Best Stocks to Buy for July.]
Bank of America has a “buy” rating and $58 price target for MS stock.
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Morgan Stanley Earnings Impress Wall Street originally appeared on usnews.com
