Morgan Stanley shares climb ahead of conference call; analysts laud 1Q results 19 March 2008
BOSTON (Thomson Financial) - Shares of Morgan Stanley extended gains for a third consecutive session Wednesday after the New York-based investment broker reported stronger-than-expected first-quarter earnings. The stock climbed 7.8% to $46.20 on volume of 8 million shares. As of Tuesday's closing price of $42.86, the stock was down about 19% year-to-date. UBS maintained its neutral rating and $50 price target on the shares, saying it was a 'strong' quarter for Morgan Stanley, which posted a 20% return on equity inclusive of mortgage-related write-downs of $1.2 billion, $1.1 billion in leveraged lending and a loss in asset management. 'Equities, commodities, rates, and foreign exchange led the way and wealth management was decent,' UBS said. 'Strong showing no doubt, but near-term outlook for the group is still challenging.' Citigroup reiterated its buy rating and $75 price target with an 'extremely attractive risk versus reward' scenario. The broker also called Morgan Stanley's latest quarter 'best in class results in a tough environment.' 'We believe that the core earnings power at Morgan Stanley has been underestimated,' Citigroup said. 'Based on the franchise's current ability to generate meaningful revenue growth, the CEO's commitment to focus on accelerating revenue growth, and a cost base that has been tremendously burdened with regulatory and legal-related costs - in our view, it's a matter of when, not if, the earnings power will meaningfully accelerate.' Goldman Sachs called the latest quarter 'outstanding' and noted that the company's 19.4% return on equity was 'impressive.' However, the broker said its estimates and price target would be under review until Morgan Stanley hosts its first-quarter earnings conference call, which is scheduled for Wednesday at 11 a.m. ET. According to Thomson Financial data, excluding the latest quarter, Morgan Stanley has beat expectations four out of the previous six quarters and the stock has, on average, risen 1.8% in a one-week period following the results. Morgan Stanley Wednesday reported first-quarter earnings of $1.55 billion, or $1.45 a share, topping Wall Street's consensus estimate of $1.03 a share. Greg Saulnier
