NEW YORK (TheStreet) -– The dramatic earnings beat that Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. (GS) Report reported this week, topping analysts' estimates by more than $1 a share amid a surge in trading revenue, may bode well for rival Morgan Stanley (MS) - Get Morgan Stanley (MS) Report.
The New York-based bank, whose stock performance has lagged Goldman's so far this year (dropping about 4% while Goldman gained 3.4%) is scheduled to report its first-quarter financial results on Monday. Goldman gained on Wednesday, topping $200 a share, after it reported earnings of $5.94 per share and revenue of $10.6 billion compared with estimates of $4.26 a share and $9.35 billion, respectively.
Goldman said about 30% of total revenue came from its fixed-income, currencies and commodities (FICC) trading business. That's housed in the Institutional Client Services unit, where sales climbed 23% from the previous year to $5.46 billion in the quarter ended March 31. Equities trading revenue gained almost 50% to $1.12 billion, the company said, the best since 2010.
In other words, Goldman, the fifth largest bank in the U.S. by total assets, capitalized on global market gyrations in the first three months of the year. And with constant talks about the Fed possibly tightening monetary policy, the volatility in the market is likely to continue.
And that suggests Morgan Stanley may be a solid way to play not only the just-ended quarter, but also the remainder of the year. Why? For starters, Morgan Stanley's trading prowess is one of its key differentiators from competitors such as JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. (JPM) Report and Citigroup (C) - Get Citigroup Inc. Report.
In 2014, for instance, Morgan Stanley was tops among all of the investment banks in terms of equity trading revenue, generating $6.9 billion for the year, slightly ahead of Goldman Sachs at $6.7 billion, according to an analysis by Trefis published in Forbes. JP Morgan ($4.8 billion), Bank of America (BAC) - Get Bank of America Corp Report ($4.1 billion) and Citigroup ($2.8 billion) were third, fourth and fifth, respectively.
For the quarter ended March 31, the bank is projected to earn 78 cents per share on revenue of $9.17 billion, marking year-over-year increases of 15% and 4%, respectively.
For the full year, ending in December, earnings per share projections of $2.89 call for a 24% year-over-year jump, while revenue of $35.8 billion would mean a 5% increase.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.