Buy Stock in the Top Investment Management Firms After Strong Q4 Results?

Favorable quarterly results from the big U.S. banks sparked the Q4 earnings season off to a good start this week, and were complemented by very strong reports from the top investment management firms.

Goldman Sachs GS and Morgan Stanley MS stood out in particular, delivering the most impressive bottom-line performance, while BlackRock BLK continued to dominate in regard to investment assets. 

Goldman & Morgan Stanley’s Net Income Growth

Thanks to a sharp rebound in its trading and investment banking services, Goldman delivered the highest Q4 net income of $4.62 billion (+12% year over year) or adjusted EPS of $14.01, which increased 17% YoY and crushed expectations of $11.77 per share by 19%.

Attributed to strong wealth management margins, Morgan Stanley’s Q4 net income came in at $4.4 billion (+19% YoY) or $2.68 per share, a 21% increase from the prior year quarter and topping estimates of $2.41 by 11%.

BlackRock’s Q4 EPS increased 10% to $13.16 and beat estimates of $12.39 by 6%, although it's noteworthy that net income actually fell 32% to $1.13 billion, attributed to higher expenses.  

Investment Assets Comparison 

BlackRock's Q4 inflows were $342 billion, which increased its assets under management (AUM) by 21% YoY to a record $14.04 trillion.

Morgan Stanley reported that its net new assets were $122 billion, with its total client assets (TCA) increasing 26% to a peak of $9.3 trillion.  

Goldman reported that its assets under supervision (AUS) increased by $469 billion, a 15% increase to a record $3.61 trillion.

Performance, Valuation, & Dividend Comparison

Trading near their all-time highs, Goldman and Morgan Stanley stocks have pleasantly outperformed the broader market over the last year, rising 53% and 39% respectively. Meanwhile, BlackRock shares are up a respectable 17% in the last year but are down 4% after hitting an all-time high in October.

Goldman and Morgan Stanley stocks are slightly more attractive in terms of P/E valuation, offering a sharper discount to the benchmark S&P 500 at under 19X forward earnings, with BlackRock shares at 21X.

Morgan Stanley’s dividend has the edge with a 2.09% annual yield, followed by BlackRock’s 1.8%, with Goldman’s at 1.64%.

Conclusion & Final Thoughts 

Outside of its more attractive stock price of under $200, Morgan Stanley stock is at the top or has the advantage in more areas than Goldman and BlackRock right now, which both trade over $900 a share.

Notably, the trend of EPS revisions for FY26 and FY27 has also been more favorable for Morgan Stanley stock, which sports a Zacks Rank #2 (Buy), with Goldman and BlackRock shares landing a Zacks Rank #3 (Hold) at the moment.    

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This article originally published on Zacks Investment Research (zacks.com).

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