The weakness in the equity trading will continue to hurt the earnings of Morgan Stanley (NYSE: MS) for the third quarter of 2019, which has been set for Thursday before the market opens. The results could also be pressurized by low-interest rates and the two Federal Reserve rate cuts.
The market experts fear the economy slipping into recession and the Fed is trying to lower these chances by two rate cuts during the third quarter. The trading activities, which could have a relatively high impact on the results, remained sluggish due to the corporate lending slowdown and trade war concerns.
The company has been struggling to achieve revenue growth in the past three successive quarters. Investors believe Morgan Stanley could continue to fall due to possible unstable capital markets in the second half and interest rate headwinds.
Morgan Stanley is expected to face additional costs, margins pressure, and an unstable loan portfolio. The retail investors are likely to continue being cautious given record market level, short intra-quarter market swings, and heightened levels of uncertainty.
Analysts expect the company’s earnings to decrease by 5.10% to $1.11 per share and revenue to decline by 2.40% to $9.63 billion for the third quarter. The company has surprised investors by beating analysts’ expectations thrice in the past four quarters. The company’s earnings estimates were revised downward several times in recent weeks.
For the second quarter, Morgan Stanley reported a 10% drop in earnings due to continued weakness in the equity trading business. The top line declined by 3% as a sharp fall in bond and equity trading at institutional securities offset the modest growth in investment banking and wealth management segments.
The company’s peers Citigroup (NYSE: C), JP Morgan (NYSE: JPM), and Wells Fargo (NYSE: WFC) will be publishing results for their most recent quarter on Tuesday while Bank of America (NYSE: BAC) is set to release its third-quarter report on Wednesday.