Morgan Stanley Posts $578 Million Loss, Slashes Dividend

Shares of financial services giant Morgan Stanley ( MS) receded Wednesday morning, on the heels of the company's larger-than-expected first-quarter loss.

The New York-based bank said late Tuesday that it lost $578 million, or 57 cents per share, during the fiscal first quarter. This compares to a profit of $1.3 billion, or $1.26 per share in the year-ago quarter. These latest results badly missed expectations. On average, Wall Street analysts expected the company to report a loss of 8 cents per share.

Because of a shift to a traditional calendar quarter, Morgan also reported December 2008 results separately, saying it lost a staggering $1.6 billion in that month alone.

Morgan said that the first-quarter results included a $1 billion loss from real estate investments, and a $1.5 billion loss because the value of its debt ballooned as the company's creditworthiness increased. CEO John Mack said that "Morgan Stanley would have been profitable this quarter if not for the dramatic improvement in our credit spreads -- which is a significant positive development, but had a near-term negative impact on our revenues."

In perhaps the biggest news to come out of the earnings report, Morgan said that it is slashing its quarterly dividend by over 81 cents, from 27 cents per share to 5 cents.

Morgan Stanley shares fell more than 8% after hours Tuesday, but pared some of those losses by Wednesday morning, when shares were trading down $1.66, or -6.7%.

We removed shares of MS from our "Recommended" list back on Aug.12, when the stock traded at $45.39. The company has a .81% dividend yield, based on last night's closing stock price of $24.65.

The stock has technical support in the $16-$19 price area. If the shares can bounce back from today's news, we see overhead resistance around the $27-$28 price levels. We would remain on the sidelines for now.

Morgan Stanley is not recommended at this time, holding a Dividend.com DARS Rating of 3.1 out of 5 stars.

Wells Fargo Shares Rise After Earnings Beat

Famous banker Wells Fargo & Company ( WFC) beat both analyst estimates and its own preannounced guidance in its earnings report Wednesday morning, sending its shares significantly higher after a small premarket drop.

The San Francisco-based bank said it earned $3.05 billion, or 56 cents per share, in the fiscal first quarter, compared to $2 billion, or 60 cents per share, in the year-ago period. Revenue rose to a record $21.02 billion, up from $10.56 billion in the first quarter last year. This quarter's results were greatly aided by Wells' acquisition of Wachovia, which contributed $8.72 billion of total revenue.

On average, Wall Street analysts expected earnings per share of 41 cents on revenue of $19.37 billion. Wells had preannounced earnings on April 9 for net income of 55 cents per share on revenue of $20 billion.

Wells Fargo shares rallied $1.34, or +7%, in morning trading Wednesday.

We removed shares of WFC from our "recommended" list back on Oct. 9, when shares traded at $31.90. The company has a dividend yield of 1.06%, based on last night's closing stock price of $18.81. The stock has technical support in the $13-$15 price area. If the shares can firm up, we see overhead resistance around the $21-$23 price levels. We would remain on the sidelines for now.

Wells Fargo is not recommended at this time, holding a Dividend.com DARS Rating of 2.5 out of 5 stars.

AT&T Profit Beats View, Despite Nearly 10% Drop Telecom giant AT&T ( T) reported first-quarter earnings Wednesday morning that beat analyst profit expectations, despite a nearly 10% drop, while total revenue declined slightly year over year.

The Dallas-based company reported fiscal first-quarter net income of $3.1 billion, or 53 cents per share, a 9.7% drop from $3.5 billion, or 57 cents per share, in the year-ago period. Excluding a 5 cent per-share charge related to pension and retiree expenses, the company earned 58 cents per share.

This adjusted per-share profit easily beat the average Wall Street analyst estimate of 48 cents per share.

Overall revenue, however, dipped slightly from the year-ago period to $30.6 billion from $30.7 billion, falling short of analyst estimates for $31.1 billion.

AT&T First-Quarter Business Unit Performance Highlights

  • Landline phone service fell 12.2% to $8.7 billion

  • Wireless subscriptions up 24% YOY, adding 1.2 million net wireless subs, including 875,000 postpaid net adds

  • Wireless data revenue up 38.6%

  • Added 471,000 broadband subscribers, including 359,000 wired broadband subs, up over 50% from Q4 2008

AT&T shares rose $1.01, or +3.92%, in morning trading Wednesday.

We recently added AT&T to our "Recommended" list on Mar. 12, when the stock was trading at $23.35. The stock has a 6.49% dividend yield, based on last night's closing stock price of $25.28. We still like the shares here and will keep investors posted on any ratings changes.

AT&T is a "recommended" dividend stock, holding a Dividend.com DARS Rating of 3.5 out of 5 stars.

McDonald's Revenue Falls, but Profit and Same-Store Sales Rise

Fast-food king McDonald's Corporation ( MCD) delivered a mixed earnings report early Wednesday, in which total revenue decreased year over year, but profit and same-store sales grew.

The Oak Brook, Ill.-based company reported fiscal first-quarter net income of $979.5 million, or 87 cents per share, from $946.1 million, or 81 cents per share, in the year-ago period. Excluding a 4-cent per-share gain from a sale of its interest in a specialized business unit, McDonald's saw an adjusted profit of 83 cents per share.

This profit was enough to beat the average Wall Street analyst estimate of 82 cents per share, however, total revenue fell to $5.08 billion from $5.61 billion in the year-ago period.

Same-store sales, considered a key indicator of a retailer's health, rose steadily in the period. Sales at restaurants open at least 13 months rose 4.3% globally, with the U.S. seeing a 4.7% increase, while the Asia/Pacific, Middle East and Africa, regions rose 5.5%, and Europe rose 3.2%.

The company said that April same-store sales are trending at least as well, or possibly better than, the latest quarterly results.McDonald's shares rose 64 cents, or +1.24%, in morning trading Wednesday.

We have been recommending shares of MCD since June 9, when the stock was trading at $56.95. The company has a dividend yield of 3.60%, based on last night's closing stock price of $55.63.

The company has been a steady performer throughout the swoon the market has experienced. We like how the shares have performed so far on our "Recommended" list and would still hold the shares here, but we are watching the name closely if the results begin to deteriorate.

McDonald's Corporation is a "recommended" dividend stock, holding a Dividend.com DARS Rating of 3.6 out of 5 stars.

At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.

Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.

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