Morgan Stanley: Financial Winner

NEW YORK ( TheStreet) -- Morgan Stanley ( MS) was the winner among the largest U.S. banks on Friday, with shares rising over 1% to close at $18.05.

The Dow Jones Industrial Average and S&P 500 ( SPX.X) index both saw slight declines and the NASDAQ Composite was down 1%, as shares of Apple ( AAPL) fell 4% to close at $509.02.

A Delaware court on Thursday ruled that Apple's iPhone violated three patents held by Sony ( SNE) and Nokia ( NOK).

UBS analyst Steven Milunovich on Friday maintained his "Buy" rating on Apple, but lowered his price target for the shares to $700 from $780, while reducing his 2013 earnings estimate for the company to $47.00 from $51.50, and his 2014 EPS estimate to $55.85 from $62.00. The analyst said although UBS was "not altering our Dec quarter numbers materially, we have taken five million iPhones and two million iPads out of the Mar, June, and Sep quarters. Our EPS estimates go down about 10% and are now roughly 5% below consensus."

Milunovich added that "although analyst estimates may need to be trimmed, we don't think the story is over. We expect that China Mobile may start to sell iPhones in the Dec quarter."

The lack of progress on the Fiscal Cliff negotiations in Washington seemed to outweigh two decent economic reports. The Federal Reserve said that U.S. industrial production increased by 1.1% in November, following a downwardly revised decline of 0.7% in October, while industrial capacity utilization increased to 78.4% from a revised 77.7%.

HSBC said that its Flash China Manufacturing Purchasing Managers Index rose to a 14-month high of 50.9 in December from 50.5 in November. A PMI reading above 50 indicates expansion. HSBC chief economist for China Hongbin Qu said that the December reading "confirmed that China's ongoing growth recovery is gaining momentum mainly driven by domestic demand conditions. However, the drop of new export orders and the downside surprise of November exports growth suggest the persisting external headwinds. This calls for Beijing to keep an accommodative policy stance to counter-balance the external weakness, provided inflation stays benign."

The KBW Bank Index ( I:BKX) declined slightly to close at 49.26, with all but five of the 24 index components ending the week declines.

Reuters reported on Friday that Morgan Stanley named Bob Eatroff and Jim Head jointly to lead the company's mergers and acquisitions business in the Americas, while Colm Donlon and Johannes Groeller were named co-heads for M&A in Europe, the Middle East and Africa.

The company also promoted Susie Huang and Michele Colocci as vice chairmen of investment banking, according to internal memos reviewed by Reuters.

Morgan Stanley's shares have now returned 21% year-to-date, following a 44% decline during 2011.

The shares trade for 0.7 times their reported Sept. 30 tangible book value of $26.65, and for nine times the consensus 2013 EPS estimate of $1.99, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is $2.32.

Morgan Stanley pays a quarterly dividend of a nickel a share.

Bank of America Merrill Lynch analyst Michael Carrier has a neutral rating on Morgan Stanley, with a $20 price target, and on Nov. 25 said that following the next round of Federal Reserve stress tests in March, there could be "upside potential" for Morgan Stanley to pay out a higher percentage of earnings.

Carrier also said that the possible regulatory approval for the company to complete its purchase of Citigroup's entire remaining stake in the Morgan Stanley Smith Barney joint venture could "mostly replace" common share buybacks.

MS Chart MS data by YCharts

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.