Morgan Stanley Warns on Outlook After 30% Quarterly Profit Drop

Morgan Stanley (MS) reported a 30% profit decline in the first quarter missing analysts’ expectations, while warning that the coronavirus-related economic pain will continue to have adverse effects on the attainment of its future financial results.

Earnings attributable to common shareholders declined to $1.59 billion, or $1.01 per share, in the first quarter ended March 31, from $2.34 billion, or $1.39 per share, a year ago. Analysts had expected a profit of $1.14 per share. Net revenues slid to $9.5 billion in the first three months of the year from $10.3 billion a year ago.

Looking ahead, Morgan Stanley warned that the coronavirus pandemic will continue to have a “severe impact” on global economic conditions and the environment in which the bank operates its business activities. More specifically, the bank expects the combination of an extended period of depressed economic activity and the severity of the related global economic crisis, to adversely impact its future operating results, and the attainment of financial targets.

“Over the past two months, we have witnessed more market volatility, uncertainty and anxiety as a result of the devastating COVID-19 than at any time since the financial crisis,” said James P. Gorman, Morgan Stanley’s Chairman and Chief Executive Officer. “While it’s too early to predict how this will unfold, Morgan Stanley navigated the quarter well given the conditions, and our results bear testament to the strength of our balanced business model.”

Gorman said that the bank’s investments in technology and infrastructure helped the more than 90% of its employees to work from home and to continue to serve clients.

As a result, Morgan Stanley’s income for the quarter was partly offset by a 30% increase in sales and trading net revenues, driven by equity sales and strong client growth in the Americas and Asia, as well as, fixed income sales.

Turning to the rating of Wall Street analysts, the bulls have it. With 9 Buy ratings and 4 Holds assigned in the last three months, the consensus rating comes in as a Moderate Buy. The $48.25 average price target suggests investors could reap a 27% gain in the next 12 months. (See Morgan Stanley stock analysis on TipRanks).

In addition, Morgan Stanley’s Board of Directors declared a quarterly dividend of 35 cents per share, payable on May 15, 2020 to common shareholders.

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