Banking group Morgan Stanley [MS] is set to report an 8.3% rise in year-over-year revenues and a 4.2% climb in earnings when it publishes its fourth-quarter figures on 19 January.  According to analysts at Zacks, the group is expected to report revenues of $14.77bn on earnings of $2 per share.

The rise will be boosted by the bank’s recent investment in its wealth management arm, which has included the acquisitions of investment and wealth management provider Eaton Vance last year and online trading platform E*TRADE in 2020. Commentary on subscriber acquisitions will boost Morgan Stanley’s share price.

“The wealth management business is growing assets at levels far beyond what we’ve seen. We believe this is going to be an economic engine for Morgan Stanley for decades to come,” said Morgan Stanley chief executive James Gorman after announcing previous quarter earnings.

Wealth growth to power share price

Analysts at Trefis said that Morgan Stanley’s fourth-quarter figures will benefit from growth in its wealth management segment as well as investment banking, equity trading and asset management. The investment banking arm will be buoyed by higher mergers and acquisitions and IPO deals, while the asset and wealth management business will be helped by its new acquisitions.

Chuck Walston, writing for Seeking Alpha, says the wealth deals have already proven to be strategically wise moves, giving Morgan Stanley a more balanced and diversified business.

“As M&A and IPO activity slows down, or when trading business fades, the wealth investment business provides a less volatile source of revenues,” he says. “Its shift to wealth management from investment banking is a positive move.”

“As M&A and IPO activity slows down, or when trading business fades, the wealth investment business provides a less volatile source of revenues. Its shift to wealth management from investment banking is a positive move” -Chuck Waston, SeekingAlpha

Share price factors result

The expected fourth quarter performance marks a slowdown from the bank’s third quarter, however. Then revenues surged 26.6% year-over-year to $14.75bn and earnings per share came in at $1.98.

It reported record net new assets of $135bn in wealth management, a 38% rise in investment management revenues, a 67% surge in investment banking revenues and a 24% rise in equity net revenues.

The Morgan Stanley share price was only slightly stirred by the strong quarter, climbing 3% in the fortnight afterwards.

A similar rise is likely if the bank performs to expectations, or exceeds them, when it announces its fourth-quarter results.

Over the past 12 months the Morgan Stanley share price has jumped 29%, compared with peers such as Bank of America up 41%, Goldman Sachs up 24% and JP Morgan Chase up 12%.

Analysts will be keenly interested in service demand and expect to see a spike in wealth management services as social curbs lift in 2022.

The performance of its recent acquisitions and any others in the pipeline will find center in the post-earnings discussion. The company’s commentary on the impact of lower market volatility on investment banking and trading revenues, as well as thoughts on potential interest rates hikes from the US Federal Reserve could spur Morgan Stanley’s shares.

There are certainly sector challenges ahead, with the Fed tapering back fiscal stimulus and uncertain economic and consumer confidence.

Stock price targets

Overall, analysts are positive on the stock, which holds a consensus ‘outperform’ rating and an average target price of $113.83, according to Market Screener.

Barclays analyst Jason Goldberg likes what he sees, recently raising the price target on the Morgan Stanley stock from $110 to $123. Goldberg has an ‘overweight’ rating.

Barclay’s believes Morgan Stanley in general will continue to outperform in 2022, with loan growth set to accelerate and net interest margins to benefit from higher interest rates, reported The Fly.

Citi has a $115 price target on the Morgan Stanley share price. Analyst Keith Horowitz expects “further multiple expansion as the company delivers on its wealth management opportunity”. He adds that Morgan Stanley offers “high qu­ality at a reasonable price”.