The stock price for the sixth largest of the big banks was inching up just hours after the release of its fourth-quarter earnings report earlier this morning.
Morgan Stanley (MS, Financial) was trading at $55.55 per share on Thursday, up 0.27% after the bank reported net revenues of $9.5 billion for the quarter, compared to $9 billion for the same period a year ago. The information was released as part of the company’s earnings report and strategic update.
Net income was $686 million, or 29 cents per share, including a tax charge under the new tax law.
The tax provision cost the bank $990 million, or a loss of 55 cents per share. If you excluded the charge, Morgan Stanley’s net income was $1.7 billion, or 84 cents a share, compared to $1.5 billion, or 74 cents a share, for the same period a year ago, according to its earnings report.
On Thursday, industry watchers, including CNBC’s Jim Cramer of “Squawk on the Street,” lauded the bank’s performance. Cramer noted bank Chairman and CEO James P. Gorman had “reinvented the company as a place for the wealthy to keep their assets.”
Gorman released a prepared statement on Thursday, saying: “Over the course of the full year, we achieved the strategic objectives outlined two years ago. In 2017, pre-tax earnings grew by 18%, driven by a 10% increase in revenues, with growth across all our business segments. This, coupled with strong expense discipline demonstrates the firm’s operating leverage. We enter 2018 with strong momentum aided by rising interest rates, tax reform and an evolving regulatory framework.”
For the full year, net revenues were $37.9 billion compared to $34.6 billion a year ago.
The favorable earnings report, to a large extent, can be attributed to advances made by its wealth management and investment management sectors, which is driven by its investment bankers and brokers. The company was ranked number one among Global IPOs and Global Equity, according to the bank’s strategic report released on Thursday.
According to GuruFocus, the bank has a financial strength of 4 out of 5 and a profitability and growth of 5 out of 10.
Its price-earnings ratio (P/E) is 15.37, or 65% higher than the industry.
The impact from the tax provision showed 5.7% return on equity for the fourth quarter and 1.3% ROE for 2017, according to the bank’s financial overview. The adjusted ROE was 8.6% for the fourth quarter and 9.4% for 2017.
According to the Peter Lynch chart, the stock is priced at fair value.
Bank stocks are expected to gain strength in 2018 as the financial giants and other corporations see significant drops in their effective tax rates.
