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Morgan Stanley (MS) is set to report its earnings before the market opens on Wednesday. Analysts estimate report earnings of $0.76 on revenue of $9.28 billion.  Bank earnings report started last week, and MS, one of the known financial giants is set to report second (2nd) quarter results this week.

 

Bank Stocks Rallied Since Last Week

Since the Obama administration, the Dodd-Frank Act became a response to the 2008 financial crisis, which was regarded as the worst economic disaster that affected the United States. It helped ease risks in the U.S. financial system with its implementation. However, the current Trump administration and the House of Representatives abolished it and replaced it with the Financial CHOICE Act last June 8.

Another reason for the bank stocks rallies is the results of the Fed’s stress test, which is an annual examination aimed at ensuring that the largest banks in the country have substantial capital to survive a financial crisis.

 

Results Before the Opening Bell

On July 19, MS is scheduled to announce its second-quarter results for the year before the opening bell. Back in its Q1 results, Morgan Stanley beat the expectations of analysts and it owed its strength from its trading and investment banking businesses.

It delivered $1 earnings per share (EPS) compared to the expected $0.88 by Thomson Reuters analysts. Its revenue was also seen to soar to $9.7 billion versus the expectations of $9.266 set by the same analysts group from Thomson Reuters.

However, due to a more challenging operating conditions, the second-quarter earnings of the company is expected to diminish.

 


Earnings Estimate Revised

Zacks Investment Research was known to revise its earnings estimate on Morgan Stanley a couple of days before the set earnings report. The Zacks Consensus Estimate for the relevant quarter was adjusted lower by 2.5%. However, the revenues and earnings of the New York-based bank are still expected to increase year over year.

 

Factors Affecting the Q2 Results

Trading revenues perceived to have little to no improvement due to low volatility. Majority of Morgan Stanley’s second quarter, there were trivial trading activities especially with the bond and equity markets. Towards the end of the quarter, trading activities increased radically but analysts say that it is not enough to pull up the figures.

Analysts at Thomson Reuters were able to record more than 50% growth in equity underwriting fees with Morgan Stanley. Data also shows a 22% rise in this segment which makes MS to reach the topmost spot.

Analysts also note that the possibility of having an upsurge in the compensation expenses of the company is relatively low.


Tracking Morgan Stanley Rivals

Tuesday, July 18, 2017, was the scheduled earnings report release of Goldman Sachs Group, Inc. (GS) before the market opens. Based on Zacks Investment Research forecast, the EPS of GS is $3.42, lower than the same quarter of last year which is $3.72.

Another competitor of Morgan Stanley, the Credit Suisse Group (CSGN), is set to report its Q2 earnings on July 28, 2017 before the market opens. The period coverage is until June 2017. Last year, the reported EPS for CSGN was $0.08.

 

Conclusion

Earnings report season is an integral element that shareholders must pay attention to. The overall health of publicly-traded companies can be assessed through these reports that reveal their net income, sales, earnings per share (EPS), expenses and all other important data. If the earnings report matches or is higher than the market expectations (which is usually set by polling analysts in advance) then the market may swing towards a positive action.

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