Morgan Stanley Big News Flops
Stocks: (MS)(LEH)(GS)(BCS)
Morgan Stanley announced that its revenue was up 48% for the period ending May 31 compared to a year ago, hitting $8.9 billion. Earnings before taxes were up 128% to nearly $3.2 billion. Earnings for the institutional securities and Discover card businesses were especially strong.
Prudential immediately upgraded the stock. The stock barely moved 4% depites dozens of headlines about the spectacular performance. The shares still sit under $60, well below the 52-week high of $66.
Like the shareholders of Goldman Sachs, Lehman Bros., and Bear Stearns, the Morgan Stanley holders are learning a hard lesson. No matter how much earning rise, if Wall Street is concerned about the market in general, investment banking stocks will not react. A mediocre market environment smells too much of risk.
The argument about market weakness and banking stocks has its flaws. M&A activity has been unusually strong, and that is not likely to disappear soon. Hidden in the merganser Stanley announcement was the fact that the firm had a 30% share in completed M&A transactions in the first five months of the year. The business not only produces great revenue. It tends to have superior margins.
With the markets off and no clear catalyst to make them run up again, the skepticism about investment banking results will persist. And that is not a positive of Morgan Stanley shareholders.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in the companies he writes about.
Morgan Stanley announced that its revenue was up 48% for the period ending May 31 compared to a year ago, hitting $8.9 billion. Earnings before taxes were up 128% to nearly $3.2 billion. Earnings for the institutional securities and Discover card businesses were especially strong.
Prudential immediately upgraded the stock. The stock barely moved 4% depites dozens of headlines about the spectacular performance. The shares still sit under $60, well below the 52-week high of $66.
Like the shareholders of Goldman Sachs, Lehman Bros., and Bear Stearns, the Morgan Stanley holders are learning a hard lesson. No matter how much earning rise, if Wall Street is concerned about the market in general, investment banking stocks will not react. A mediocre market environment smells too much of risk.
The argument about market weakness and banking stocks has its flaws. M&A activity has been unusually strong, and that is not likely to disappear soon. Hidden in the merganser Stanley announcement was the fact that the firm had a 30% share in completed M&A transactions in the first five months of the year. The business not only produces great revenue. It tends to have superior margins.
With the markets off and no clear catalyst to make them run up again, the skepticism about investment banking results will persist. And that is not a positive of Morgan Stanley shareholders.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in the companies he writes about.
posted by douglas mcintyre at 12:13 PM
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