NEW YORK (Reuters) - U.S. investment bank Morgan Stanley (MS) on Wednesday said second-quarter earnings more than doubled, trouncing expectations and offering investors a sign that the firm's year-long turnaround efforts are starting to bear fruit.
The No. 3 securities firm by market value reported net income of $1.96 billion, or $1.86 a share, in the three months ended May 26, up from $928 million, or 86 cents, a year earlier. Net revenue rose 48 percent to a record $8.9 billion, fueled by sharp gains in nearly every business.
The results exceeded the average analyst estimate by about 30 percent, according to Reuters Estimates, and sent Morgan shares up 2.9 percent to $58.65 in premarket trade on the Inet electronic brokerage system.
"Morgan Stanley stock, which has been lagging the industry, is likely to start catching up," said Punk Ziegel & Co. analyst Richard Bove. "People can now have some degree of confidence that this company has turned around."
It was the fourth straight quarter of improving results under Chairman and Chief Executive John Mack, who joined Morgan Stanley on June 30 last year. He replaced Philip Purcell, who was ousted to quiet a shareholder rebellion sparked by years of disappointing financial and stock performance.
Institutional securities net revenue rose 71 percent to $5.7 billion, fueled by robust trading and underwriting fees. Fixed-income trading, the growth engine for Wall Street firms, nearly doubled revenue to $2.4 billion.
Equities trading revenue rose by half to $1.7 billion, despite a sharp downturn in stock markets last month. Merger advisory fees were up 8 percent from last year.
Revenue from its Discover credit card and payments unit rose 34 percent to $1.19 billion. Credit card balances rose 4 percent to $48.5 billion, while loan charge-offs fell sharply.
Meanwhile, revenue from the firm's wealth management business, which has been a drag on earnings in recent years, rose 14 percent to $1.4 billion.
Some analysts, though, cautioned that the results may have been boosted by one-time private equity gains, surprisingly low credit card losses and less-than-expected compensation costs.
"It's a very strong number," Sandler O'Neill & Partners analyst Jeff Harte said of Morgan's per-share result. "Yes, it's good news for the stock, but we have to sort out how much of this is recurring."
Last week rivals Goldman Sachs (GS), Lehman Brothers (LEH) and Bear Stearns (BSC) reported soaring profit from mergers, underwriting fees and trading. Yet their shares fell on concern that business could be hurt if the recent downturn in the stock market were to persist.
Morgan Stanley shares are up 8.7 percent since June 30 last year, when John Mack took over as chief executive, lagging its peers in that period. The shares are down 13 percent from their May highs and fetch less than 2.1 times book value.
CHICAGO (Reuters) - Package delivery company FedEx Corp. (FDX) said on Wednesday that quarterly net profit increased 27 percent on strong international and U.S. economic growth, beating market expectations.
The company's stock rose nearly 3 percent in pre-market trade.
Analysts said FedEx's results showed a strong quarter and indicated that the global economy is doing well.
The Memphis, Tennessee-based company said net earnings for its fiscal fourth quarter ending May 31 rose to $568 million, or $1.82 a share, compared with $448 million, or $1.46 a share a year earlier.
Analysts on average had expected earnings for the quarter of $1.77 a share, according to Reuters Estimates.
Often seen as a bellwether of the U.S. economy, FedEx reported revenue for the quarter of $8.49 billion, compared with $7.72 billion in the same quarter a year earlier.
FedEx reported that its operating margin rose to 10.9 percent from 9.6 percent the previous year.
"Overall, this looks like a pretty solid quarter for FedEx," said Peter Smith, an analyst at Morningstar.
"It also appears to be evidence that the global economy continues to hum along at a decent pace."
Analysts highlighted the robust growth of FedEx Freight, the company's less-than-truckload unit, where revenue in the fiscal quarter rose 15 percent, to $973 million from $843 million.
But FedEx Kinko's, which has not performed as well as expected since FedEx acquired the unit in February 2004, saw revenue fall to $542 million from $553 million.
"FedEx Kinko's performance continued to be constrained," Chief Financial Officer Alan Graf said in a conference call with analysts, but added that FedEx is working to improve the unit's results.
FedEx said that it expected earnings per share for its fiscal 2007 first quarter of $1.45 to $1.60. Wall Street analysts have forecast earnings of $1.42 per share, according to Reuters Estimates.
FedEx also said it expects full-year 2007 earnings per share of $6.45 to $6.80. Analysts have forecast full-year earnings of $6.73 a share, according to Reuters Estimates.
"We remain optimistic about the global economic environment for fiscal 2007 and our ability to effectively manage our business," FedEx's Chief Executive Officer Frederick Smith said in a statement.
CFO Graf said in the conference call that FedEx plans capital expenditures of $2.9 billion in fiscal year 2007.
In pre-market electronic trading, FedEx shares were last up about 1.5 percent at $109.90 after closing at $108.32 Tuesday on the New York Stock Exchange. FedEx shares reached $111.02 in trade earlier.