It has been about a month since the last earnings report for Morgan Stanley (MS). Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Morgan Stanley due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Morgan Stanley before we dive into how investors and analysts have reacted as of late.
Morgan Stanley Beats Q2 Earnings on Robust Trading, IB Remains Subdued
Morgan Stanley’s second-quarter 2025 earnings of $2.13 per share handily outpaced the Zacks Consensus Estimate of $1.93. Also, the bottom line rose 17% from the prior-year quarter.
Morgan Stanley’s IB business performance was subdued. Advisory fees declined 14% year over year as completed M&A transactions dropped. Further, lower non-investment grade issuances hurt the company’s fixed income underwriting fees, which decreased 21%. On the other hand, equity underwriting income jumped 42%. So, total IB fees (in the IS division) fell 5% to $1.54 billion. We had projected it to be $1.55 billion.
Meanwhile, as expected, the company posted a solid trading performance. Equity trading revenues increased 23% year over year to $3.72 billion and fixed-income trading income was up 9% to $2.18 billion. Our projections for equity and fixed-income trading revenues were $3.03 billion and $2.12 billion, respectively.
Further, the performance of wealth management and investment management businesses was impressive. The company’s NII increased, given higher lending activities. The increase in total non-interest expenses and provisions posed the undermining factors.
Net income applicable to common shareholders was $3.39 billion, up 15% from the year-ago quarter. Our estimate for the metric was $3.22 billion.
Revenues Jump, Expenses Rise
Quarterly net revenues were $16.79 billion, up 12% from the prior-year quarter. The top line handily beat the Zacks Consensus Estimate of $15.92 billion.
NII was $2.34 billion, up 14%. We had projected NII of $2.27 billion.
Total non-interest revenues of $14.45 billion rose 12%. Our estimate for the metric was $13.63 billion.
Total non-interest expenses were $11.97 billion, up 10%. Our estimate for the metric was $11.59 billion.
Provision for credit losses was $196 million, up substantially from $76 million in the prior-year quarter. We had projected the metric to be $59.2 million.
Segment Performance
Institutional Securities: Pre-tax income was $2.11 billion, rising 3% from the prior-year quarter. Our estimate for the same was $2.21 billion.
Net revenues were $7.64 billion, up 9% year over year. The upside resulted from increased equity underwriting income and trading revenues, partially offset by lower advisory revenues and fixed income underwriting revenues. We had projected revenues of $7.48 billion.
Wealth Management: Pre-tax income totaled $2.2 billion, jumping 21% year over year. Our estimate for the metric was $1.83 billion.
Net revenues were $7.76 billion, rising 14%, driven by higher asset management revenues, transactional revenues and NII. We had projected revenues of $7.11 billion.
Total client assets were $6.49 trillion as of June 30, 2025, up 14% year over year. We had projected the metric to be $6.06 trillion.
Investment Management: Pre-tax income was $323 million, climbing 45% from the year-ago quarter. Our estimate for the same was $217.2 million.
Net revenues were $1.55 billion, up 12%. The improvement was attributable to a rise in asset management and related fees, and performance-based income and other revenues. We had projected revenues of $1.47 billion.
As of June 30, 2025, total assets under management or supervision were $1.71 trillion, up 13% year over year. Our estimate for the metric was $1.67 trillion.
Capital Position Solid
As of June 30, 2025, book value per share was $61.59, up from $56.80 in the corresponding period of 2024. The tangible book value per share was $47.25, up from $42.30 as of June 30, 2024.
Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.6% compared with 17.3% in the year-ago quarter. The common equity Tier 1 capital ratio was 15% compared with 15.2% a year ago.
Update on Share Repurchase Plan
In the reported quarter, Morgan Stanley repurchased 8 million shares for $1 billion.
Additionally, as the company cleared the 2025 stress test, it reauthorized a multi-year share repurchase program of up to $20 billion.
2025 Outlook
Management expects the WM segment NII to be relatively stable sequentially in the third quarter of 2025. For 2025, NII is expected to grow.
The company expects M&As and underwriting activities to find strength in the second half of the year.
The company expects the effective tax rate to be approximately 24% in the second half of 2025.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates revision.
VGM Scores
Currently, Morgan Stanley has a average Growth Score of C, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Morgan Stanley has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Morgan Stanley is part of the Zacks Financial - Investment Bank industry. Over the past month, Citigroup (C), a stock from the same industry, has gained 2.6%. The company reported its results for the quarter ended June 2025 more than a month ago.
Citigroup reported revenues of $21.67 billion in the last reported quarter, representing a year-over-year change of +7.6%. EPS of $1.96 for the same period compares with $1.52 a year ago.
For the current quarter, Citigroup is expected to post earnings of $1.86 per share, indicating a change of +23.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.1% over the last 30 days.
Citigroup has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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Morgan Stanley (MS): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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