Morgan Stanley shares fall the most in six weeks on Thursday, fourth-quarter results fall short of estimates as bond trading revenue drops

Morgan Stanley’s (MS) fourth-quarter revenue and earnings, reported on Thursday, fell short of Wall Street estimates, after heightened market volatility at the end of 2018 adversely affected the bank’s revenue from trading, underwriting, wealth management and asset management.

Morgan Stanley shares closed lower for the third time in the past ten trading sessions in New York on Thursday. It has also been the steepest daily loss since December 4th. The stock went down 4.41% ($1.96) to $42.53, after touching an intraday low at $41.64, or a price level not seen since January 14th ($41.12).

Shares of Morgan Stanley have risen 7.26% so far in 2019 compared with a 5.15% gain for the benchmark index, S&P 500 (SPX).

In 2018, Morgan Stanley’s stock retreated 24.43%, thus, it underperformed the S&P 500, which registered a 6.24% loss.

Morgan Stanley’s revenue, net of interest expense, was reported to have decreased 10% year-on-year to $8.55 billion during the fourth quarter. The figure compares with a median analyst estimate of $9.30 billion.

Total sales and trading revenue shrank 7% year-on-year to $2.49 billion during the quarter ended on December 31st, since revenue from bond trading registered a 30% slump. Revenue from equities trading was essentially unchanged from a year ago at $1.93 billion.

Morgan Stanley said revenue from its merger and acquisition (M&A) advisory business had risen 41% year-on-year during the latest quarter. On the other hand, revenue from the bank’s key wealth management business registered a 6% year-on-year drop.

Meanwhile, net income attributable to shareholders more than doubled to $1.53 billion (or $0.80 per share) during the quarter ended on December 31st compared to the same period a year earlier, when Morgan Stanley took a one-time charge associated with the US tax code reform.

In comparison, analysts on average had expected earnings of $0.89 per share.

“2018 was a great year that finished on a disappointing note,” James Gorman, Morgan Stanleys Chief Executive Officer, was quoted as saying by Reuters. “We do not believe the fourth quarter is the new normal,” he added.

According to CNN Money, the 26 analysts, offering 12-month forecasts regarding Morgan Stanley’s stock price, have a median target of $55.00, with a high estimate of $72.00 and a low estimate of $45.00. The median estimate represents a 29.32% upside compared to the closing price of $42.53 on January 17th.

The same media also reported that 16 out of 28 surveyed investment analysts had rated Morgan Stanley’s stock as “Buy”, while 9 – as “Hold”.

Weekly Pivot Levels

By using the traditional method of calculation, the weekly levels of importance for Morgan Stanley (MS) are presented as follows:

Central Pivot Point – $41.70
R1 – $42.45
R2 – $43.15
R3 – $43.90
R4 – $44.64

S1 – $41.00
S2 – $40.25
S3 – $39.55
S4 – $38.84

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