March 26, 2023
MS Earnings Preview | Q4 2022
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MS Earnings Preview | Q4 2022

Morgan Stanley (MS) will publish its earnings report on Tuesday, January 17, 2023, before the US market opens. After weak results in the past two quarters, investors hope to beat the expectation in the last quarter of the year. In the previous four quarters, the company could beat consensus EPS estimates three times, but it was just $0.02 above the consensus expectations in one of them.

Investors will focus on their outlooks for 2023, especially for the next quarter.

Revenues are expected to be $12.17 billion, 16.2% less than the year-ago quarter. Zacks Investment Research, Inc. analysts expect $1.25 earnings per share, showing a year-over-year change of -39.9%. Researching institutes expect $1.19 – 1.30 EPS.

In quarter 3 of 2022, it was expected to show a $1.51 earning per share when it produced $1.53, delivering a +1.32% surprise.

Morgan Stanley is one of the most active financial institutes in stock markets and trading, relying less on interest income and more on its asset and wealth management businesses. At the same time, with increasing the banking rates, we could have two encouraging reasons to be optimistic about the final results, but the effects of geopolitical tensions and other risks on the market lowering our hopes of better results.

After some weakness in economic activities, which ended with less hawkish tones of central banks, especially the US Fed, wall street reacted much better, and we could see more gains in stock numbers and many other assets. This cheerful tone of financial markets can help the MS trading business, which is a significant portion of its activities. Zacks estimates equity and fixed-income trading revenues to be seen at $2.16 billion and $1.52 billion, respectively. This segment typically accounts for about a third of company revenue, estimated to fall 16% in the fourth quarter.

Despite recent turns in Fed policies, raising interest rates by 125 basis points in the quarter brought the Fed rate target to 4.25-4.50%, the highest in the past 15 years. Even if it causes an inversion of the yield curve and also fewer numbers of credits yet, higher rates are likely to increase Morgan Stanley`s net interest margin.

At the time of writing, Morgan Stanley traded at $91.55 as of January 16. During 2022, MS`s share price fell by 7.5%, with the S&P 500 falling by 14%. Therefore, missing estimates can increase the pressure on stock prices to fall further. However, Investors will focus on their outlooks for 2023, especially for the next quarter, rather than waiting to see the numbers, which are already predictable.

From the technical point of view, $95 is the key resistance, and if a positive report raises the stock price, steady trading above this level can open the doors for higher levels at $103 and $109. On the flip side, breaching under crucial support at $84 can change the market direction, putting the $75 in radars before bulls take over the charts.

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