Morgan Stanley (MS) Loses Money, Beats Earnings Estimates
Morgan Stanley’s (NYSE: MS) fourth-quarter earnings are the latest example of the stock market rewarding a company for beating analysts’ expectations even if it’s losing money.
One of the nation’s largest investment banks suffered $227 million in losses in the fourth quarter, a huge drop-off from the $871 million in profits the bank made in the same quarter a year ago. But because most analysts expected even steeper losses for Morgan Stanley, its stock climbed 5.1% in early trading today.
It’s no surprise that analysts set the bar so low. Investment banks took it on the chin last quarter amid one of the more volatile trading climates in recent memory. Morgan Stanley’s largest competitor in the investment banking sector, Goldman Sachs (NYSE: GS), saw its earnings decline a whopping 58% in the fourth quarter. But like Morgan Stanley, Goldman Sachs also beat analyst expectations, sending its stock up 8.2% in the last two days.
Other big banks such as Bank of America (NYSE: BAC) and Citigroup (NYSE: C) suffered losses in their investment banking wings.
Considering the difficult investing climate, Morgan Stanley’s equity trading revenue was actually impressive. Revenues in its equities-trading business climbed 18% to $1.3 billion from a year ago. The bank’s stock-underwriting revenues, however, were down 71% from 2010.
What really took a toll on Morgan Stanley’s balance sheet was a sizable charge related to a legal settlement. The bank lost $1.7 billion in a settlement with MBIA, putting to bed a legal battle over guarantees tied to commercial and residential real estate.
Morgan Stanley stock is currently trading at $18.25 a share.
