Morgan Stanley’s Business Diversification Cuts Volatility in Revenue, Earnings, RBC Says

Morgan Stanley’s (MS) business diversification significantly reduced its revenue and earnings volatility compared with the financial crisis in 2008 to 2009, RBC Capital Markets said Tuesday in a report.

RBC raised Morgan Stanley’s price target to $91 from $85 and kept its sector perform rating.

The investment bank on Tuesday reported Q4 earnings of $0.85 per share, weighed down by certain charges, compared with $1.26 a year earlier. Revenue rose to $12.9 billion from $12.75 billion.

Morgan Stanley’s core EPS was $1.15 based on RBC’s calculation, compared with $1.31 a year earlier. That beat RBC’s estimate of $0.97, mainly driven by better-than-expected net interest income and a lower-than-expected effective tax rate, according to the report.

RBC raised its 2024 EPS estimate to $6.15 from $6.05 and maintained its 2025 EPS estimate of $7.55.

Morgan Stanley is expected to implement stock buybacks and dividend increases using its excess capital, resulting in the company returning up to 100% of earnings, RBC said.

Shares of Morgan Stanley fell 2.3% in recent Wednesday trading. J.P. Morgan Securities downgraded the stock to neutral from overweight, and Keefe Bruyette & Woods downgraded the stock to market perform from outperform. Both analysts cut their price targets.

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