US bank earnings and price forecasts: Morgan Stanley Q2 2022 results preview

[MongiIG]

Morgan Stanley Q2 2022 results are expected to show year on year decline in both revenue and earnings.

Source: Bloomberg

 

Shares Morgan Stanley Price Price–earnings ratio Valuation Share price

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Tuesday 12 July 2022 

When are the Morgan Stanley results expected?

Morgan Stanley is set to release second quarter (Q2) results for the fiscal year 2022 on 14 July 2022.

What is ‘The Street’s’ expectations for the Q2 2022 results?

‘The Street’ expectations for the upcoming results are as follows:

• Revenue of $13.516 billion: -8.42% year on year (YoY)
• Earnings per share (EPS) $1.54: -16.85% YoY

 

How to trade Morgan Stanley into the results

Source: Refinitiv

 

Refinitive data shows a consensus of (29) analyst ratings at ‘buy’ for Morgan Stanley. A mean of estimates suggest a long-term share price target of $96.89 for the company. The current share price trades at a 26% discount to this assumed long-term fair value (as of 11 July 2022).

Source: IG

 

IG sentiment data shows that 84% of clients with open positions on the share (as of 11 July 2022) expect the price to rise over the near term, while 16% of these clients expect the price to fall.

 

How does Citigroup compare to its peers in terms of valuation?

Source: IG

 

The above table compares Morgan Stanley against a peer average (which includes Goldman Sachs, Bank of America (BoA), Wells Fargo, JP Morgan and Citigroup) in terms of dividend yield and price to earnings (P/E) multiples.

Morgan Stanley currently trades at a premium to its sector peers in terms of a historical and forward P/E, and a discount to the S&P 500 benchmark index (at a P/E of 28 times).

The group’s dividend offering has been higher than its peers in aggregate.

 

Morgan Stanley – technical view

Source: IG charts

 

The long-term price trend for the share price of Morgan Stanley remains down, evidenced by the price trading firmly below the 200 day simple moving average (SMA) represented by the blue line, and the red trend line on our chart. The share is however moving out of oversold territory in the very near term.

The long-term trend takes precedence with support considered at 72.80 and 66.65 respectively. A downside break (confirmed with a close) of the 72.80 level would call for further decline with 66.65 the initial target considered. Only if a rebound from oversold territory takes the price back above the major high at 86.70, would we reassess the merits of returning a long bias to trades on the company.

Summary:

• Morgan Stanley is set to release Q2 2022 results on 14 July 2022
• Q2 2022 are expected to show a YoY decline in both revenue and EPS
• Long-term broker consensus suggests the share to currently be a ‘buy’, with a longer-term price target of $96.89
• IG clients with open positions on the share are predominantly long
• The long-term price trend for Morgan Stanley is down