Morgan Stanley Stock Swings Higher After Impressive Earnings

outside of Morgan Stanley headquarters in New York City — (Image credit: Michael Nagle/Bloomberg via Getty Images)

Investors were hesitant on how to react after Morgan Stanley (MS) beat top- and bottom-line expectations for its second quarter. Shares of the banking giant were initially down more than 3% in pre-market trading but have since swung into positive territory.

In the quarter ended June 30, Morgan Stanley said its revenue was up 11.6% year-over-year to $15 billion, due in part to a 51% spike in investment banking revenue to $1.6 billion. The company also said its earnings per share (EPS) surged 46.8% from the year-ago period to $1.82.

"The biggest bright spot for MS was a clear rebound in the investment banking segment," says Brian Mulberry, client portfolio manager at Zacks Investment Management. "The return of Wall Street activity helped [the bank] post net income up 41% from a year ago showing an improving capital markets environment."

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Mulberry says this allowed Morgan Stanley to give positive forward guidance, which has been a definable trend. "Markets are more concerned about the next couple of quarters, even more than recent results," he adds.

As for those recent results, they crushed analysts' expectations. Wall Street was anticipating Q2 revenue of $14.3 billion and earnings of $1.65 per share, according to CNBC.

The financial firm also reiterated that it will increase its dividend by 8.8% in the third quarter and said that it repurchased $800 million of common stock during the quarter as part of its recently announced $20 billion share repurchase program. Dividends and stock buybacks can boost value for shareholders.

"We continue to execute on our strategy and remain well positioned to deliver growth and long-term value for our shareholders," Morgan Stanley CEO Ted Pick said in a statement.

Is Morgan Stanley stock a buy, sell or hold?

Although the financial stock is up 15% for the year to date on a total return basis (price change plus dividends), Wall Street is sitting on the sidelines.

Of the 23 analysts tracked by S&P Global Market Intelligence, four rate it a Strong Buy, three call it a Buy and 16 have it at Hold. This works out to a consensus recommendation of a Hold. Meanwhile, the average analyst target price for MS stock is $100.54, representing a discount to current levels.

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Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.