This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Buy Morgan Stanley on 'Earnings Momentum': Deutsche Bank

Stocks in this article: MS C

NEW YORK ( TheStreet) -- Morgan Stanley's (MS) "earnings momentum is poised to accelerate," according to Deutsche Bank analyst Matt O'Connor, who late on Thursday upgraded the investment bank's shares to a "buy" rating from a "hold" rating.

Morgan Stanley previously announced plans to purchase its remaining 35% stake in its retail brokerage joint venture with Citigroup (C), and is awaiting Federal Reserve approval to complete the transaction, which could come "any day," according to O'Connor.

Having the full revenue stream from the joint partnership will boost Morgan Stanley's earnings, as will the continued rise in equity prices.

"MS has previously estimated a $400m lift to earnings from buying in the remainder of the stake, greater order flow capture, elimination of certain expenses and a partial benefit of a pickup in deposits," O'Connor wrote. The analyst expects "an additional earnings boost," as $50 billion in deposits move onto Morgan Stanley's balance sheet over time.

O'Connor added that "if the market holds at current levels, there's about $0.10 of annual EPS lift to come (with a similar additional EPS lift for each further 5% rise in the markets)."

The analyst also sees "meaningful leverage to rising interest rates," for Morgan Stanley, writing that "a 100bp move in rates would boost annual EPS by about $0.20."

The Federal Reserve has kept the short-term federal funds rate in a range of zero to 0.25% since later 2008. Since September, the central bank has been making monthly purchases of $85 billion in long-term securities in an effort to hold long-term rates down.

The Federal Open Market Committee has repeatedly said it was likely to leave the federal funds rate in its current range at least until the U.S. unemployment rate moves below 6.5%. But top FOMC and Federal Reserve officials have given conflicting statements recently about the timing of a curtailment of the Fed's bond-buying.

The market always anticipates monetary policy changes, and the recent rise in market rates on 10-year U.S Treasury bonds could signal a policy change in the near term. The market rate for 10-year U.S. paper was 2.13% on Thursday, increasing from 1.70% a month earlier.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs