Rough trading has led to sluggish performances for a number of key investment houses as of late, including Morgan Stanley (MS – Analyst Report). The well-known investment firm has seen its shares tumble by over 7.5% in the past month, while it has plummeted 20% in the past six months as well. But what's behind this intense selling pressure, besides the overall weak trading environment?
Well the idea that the federal government won't step in during the next crisis isn't exactly a plus for MS investors, but there are definitely other issues for Morgan Stanley right now. Recently, the company announced a nearly quarter of a billion dollar settlement to settle MBS claims from the financial crisis, while it also recently cut 1,200 jobs in its FICC (fixed-income, currencies and commodities) unit. The job cuts are also expected to result in $150 million in charges for Q4, adding to Morgan Stanley's woes.
But the real problem remains the toxic trading environment and the impact this will have on the MS bottom line. We already saw this in the previous quarter's earnings announcement which easily missed expectations, and with recent worries in the markets there is plenty of reason to believe a similar situation will happen this quarter too. This may be especially true if you look to analysts and their recent earnings estimates for Morgan Stanley stock.
Recent Estimates
Analysts have actually been racing to slash their estimates for MS stock lately as not a single estimate has gone higher for the current year, next year, or current quarter in the past sixty days. Instead we have seen a huge level of agreement among covering analysts that recent earnings expectations are just too high relative to what MS is likely to produce in the near term.
Current year estimates have fallen from $3.03/share to $2.54/share in the past 90 days, while the current quarter estimate has slumped from $0.64/share to $0.50/share in the same time frame. And the most accurate estimates we have are even worse, with the current quarter seeing a 12% decline from even this low consensus.
