Morgan Stanley (MS) Earnings Approach: Price Target Raised Leading In

Morgan Stanley (NYSE: MS) is gearing up to announce its third-quarter 2025 earnings on Wednesday, a highly anticipated event following a period of significant growth and a resurgence in investment banking activity across the sector. 

Analysts expect Morgan Stanley to report earnings per share (EPS) of $2.11, up from $1.88 in the same quarter last year, marking a 12.2% year-over-year increase. Revenue is projected to reach $16.67 billion, reflecting 8.39% growth compared to the prior year. These estimates suggest solid performance momentum heading into the earnings report.

Despite the recent pullback, Morgan Stanley's overall performance has been robust. Over the past year, the stock has delivered a remarkable 40.51% return, significantly outperforming the majority of its peers in the S&P 100. This upward trajectory has been fueled by a combination of factors, including easing regulations, anticipation of interest rate cuts, and a resilient U.S. economy that has spurred increased merger, acquisition, and IPO activity.

The company also had a  strong performance in the second quarter of 2025, when it reported a net income of $3.39 billion, or $2.13 per share, exceeding analysts' expectations. The second quarter's success was driven by a 12% increase in net revenues to $16.79 billion, with notable growth in both net interest income and non-interest income.

UBS analyst Erika Najarian recently raised the firm's price target on Morgan Stanley to $165 from $156, maintaining a Neutral rating. Najarian noted that bank stocks delivered strong Q2 gains, with share price appreciation outpacing estimate revisions, driven by deregulation, improving capital markets activity, and solid loan growth.

While the prevailing sentiment surrounding Morgan Stanley is optimistic, it's crucial to consider a potentially contrarian viewpoint. The current stock price reflects the market's expectation of continued strong performance. But what if the third quarter doesn't live up to the hype? 

The remarkable growth experienced over the past year may not be sustainable. The rebound in investment banking could be a temporary phenomenon, and a slowdown in global economic growth could put a damper on future deal-making. The market may be overestimating Morgan Stanley's ability to consistently deliver outsized returns. 

Furthermore, the Fifth Third (FITB)/Comerica (CMA) merger may signal underlying weakness in regional banks, rather than reigniting interest. If management signals a rebound in middle-market C&I lending and NIM improvement from a steepening yield curve, it may be an indication of smoke and mirrors.

The conference call will provide valuable insights into the company's strategy and outlook. The recent price target increase from UBS underscores the positive sentiment, but the range of analyst estimates highlights the inherent uncertainties in the market.