TheChek News Flow

In reaction to disappointing earnings/guidance: REGI -15.7%, EFII -4.2%, IBM -4.1%, SAP -4.1%, DEO -3.8%, MAT -3.6%, NSR -3.4%, (light volume), GOOG -2.6%, SLM -2%, AXP -0.6%, KSU -0.2%, COF -0.2% (light volume), UNH -0.2% (light volume).

Tech/internet names under pressure following heavyweight GOOG disappointing results: YELP -1.9%, YY -1.5%, QIHU -0.9%, BIDU -0.9%, FB -0.9%, PCLN -0.9%, AMZN -0.8%, LNKD -0.5%, TWTR -0.5%, SINA 0.8%, .

Select metals/mining stocks trading lower: BHP -1.2% (Bloomberg discusses that BHP spinoffs may not increase profits), BBL -1.1%, RIO -1%, GOLD -0.9%, GDX -0.6%.

Other news: UEPS -20.6% (still checking for catalyst), SSN -8.7% (provides weekly operations update; announces equity placement), YOD -6.1% (cautious blog mention), SNH -5.6% (announces proposed public offering of 12 mln common shares), SYNM -4.3% (followiong REGI results), BKS -3.2% (still checking), MPET -2% (receives the final AUD $5 mln payment contemplated by the Share Sale and Purchase Deed entered into with Central Petroleum for the sale of the co's onshore Australia assets), UL -1.6% (following DEO results), HMC -1.6% (still checking), SPWR -1.3% (disclosed certain holders of the Debentures exercised their rights to convert their Debentures into shares; SunPower issued a total of ~7.1 mln shares ), BUD -0.9% (following BUD and REMYF results), HPQ -0.7% / ORCL -0.3% / MSFT -0.5% (following IBM results), V -0.4% (following AXP / COF results).

Analyst comments: NGLS -1.3% (downgraded to Hold from Buy at Jefferies), SO -0.5% (downgraded to Sector Perform from Outperform at RBC Capital), SDRL -0.4% (downgraded to Neutral from Buy at BofA/Merrill)

In reaction to strong earnings/guidance: PLXS +8% (light volume), CMG +6.8%, SNDK +6.7% (also assumed with an Overweight at Piper Jaffray), NE +4.2%, TPLM +4.1%, BHI +3.7%, BLK +3.2%, BX +3.1%, URI +3%, MS +2.9%, AF +2.9% (light volume), TSM +2.7% (light volume), ALSN +2.5% (light volume), PEP +2.4%, UNP +2.3%, SHW +2.3% (light volume), CY +2.1% (light volume), GE +2%, GS +1.5%, FHN +1.4% (ticking higher), PM +0.8%, BAX +0.8%, PTP +0.3%, (light volume).

M&A news: POST +1.4% (to acquire Michael Foods for $2.45 billion; transaction is expected to be accretive to Post's earnings per share prior to giving effect to purchase accounting adjustments and one-time transaction expenses), AIZ +0.5% (acquires StreetLinks for ~ $90 mln in cash, plus a potential earnout payment based on future performance; expected to be accretive to earnings in 2015).

Select financial related names showing strength boosted by earnings from several names in the sector: NBG +4.3% (upgraded to Neutral from Underweight at JP Morgan), BCS +3.6%, DB +0.8%, ING +0.6%, JPM +0.3%.

Battery related names are higher: FCEL +3%, PLUG +1.3%, CPST +1%,

A few India related names are modestly higher: TTM +1.8%, IBN +1.8%, VOD +0.5%

Other news: AAU +31% (ticking higher; announces positive PEA for the Ixtaca Gold-Silver Deposit, Mexico), SD +3.4% (positive MadMoney mention), NFLX +2.6% (Senator Franken critical of Comcast and NFLX interconnection deal, according to reports; upgraded to Outperform from Sector Perform at Pacific Crest)), EEFT +1.9% (Euronet and Wal-Mart to announce new service; will host call April 17 at 8:30am ET), END +1.6% (Endeavour Intl announces settlement of SM Energy (SM) litigation), SYT +1.1% (follow through from yesterday's earnings), MU +0.7% (following SNDK results)

Analyst comments: GOGO +5.9% (upgraded to Overweight from Neutral at JPMorgan), SCTY +2.3% (upgraded to Outperform form Neutral at Robert W. Baird), BWP +2.1% (upgraded to Overweight from Neutral at JPMorgan), BOFI +0.9% (upgraded to Buy from Neutral at Sterne Agee)

Reports Q1 (Mar) earnings of $4.02 per share, $0.59 better than the Capital IQ Consensus Estimate of $3.43; revenues fell 7.5% year/year to $9.33 bln vs the $8.74 bln consensus.

• Annualized return on average common shareholders' equity (ROE) was 10.9% for the first quarter of 2014.

Institutional Client Services

• Net revenues in Institutional Client Services were $4.45 billion for the first quarter of 2014, 13% lower than the first quarter of 2013 and 31% higher than the fourth quarter of 2013.
• Net revenues in Fixed Income, Currency and Commodities Client Execution were $2.85 billion, 11% lower than the first quarter of 2013, reflecting significantly lower net revenues in interest rate products, currencies and mortgages, as well as lower net revenues in credit products. These results were partially offset by significantly higher net revenues in commodities compared with the first quarter of 2013. During the quarter, market-making conditions generally improved compared with the fourth quarter of 2013. However, Fixed Income, Currency and Commodities Client Execution continued to operate in a challenging environment and levels of activity generally remained low.
• Net revenues in Equities were $1.60 billion, 17% lower than the first quarter of 2013.
• Net revenues in equities client execution were significantly lower compared with the same prior year period, primarily reflecting the sale of the firm's Americas reinsurance business. In addition, net revenues were significantly lower in both derivatives and, to a lesser extent, cash products.
• Commissions and fees were slightly higher compared with the first quarter of 2013, primarily reflecting an increase in European equity volumes.
• Securities services net revenues were higher compared with the first quarter of 2013, reflecting growth in customer balances.
• During the quarter, Equities experienced challenging market-making conditions, particularly in Japan and certain emerging markets as equity prices declined. The net gain attributable to the impact of changes in the firm's own credit spreads on borrowings for which the fair value option was elected was $15 million (all related to Fixed Income, Currency and Commodities Client Execution) for the first quarter of 2014, compared with a net loss of $77 million for the first quarter of 2013.

Investing & Lending

• Net revenues in Investing & Lending were $1.53 billion for the first quarter of 2014, 26% lower than both the first quarter of 2013 and the fourth quarter of 2013. Results for the first quarter of 2014 included net gains of $702 million from investments in equities, primarily driven by private equities, principally reflecting company-specific events.

Investment Management

• Net revenues in Investment Management were $1.57 billion for the first quarter of 2014, 20% higher than the first quarter of 2013 and 2% lower than the fourth quarter of 2013. The increase in net revenues compared with the first quarter of 2013 reflected significantly higher incentive fees, as well as higher management and other fees primarily due to higher average assets under supervision.

Expenses

• Operating expenses were $6.31 billion, 6% lower than the first quarter of 2013 and 21% higher than the fourth quarter of 2013.
• Compensation and Benefits was $4.01 billion for the first quarter of 2014, 8% lower than the first quarter of 2013, reflecting a decrease in net revenues. The ratio of compensation and benefits to net revenues for the first quarter of 2014 was 43.0%, consistent with the first quarter of 2013.
• Non-Compensation Expenses were $2.30 billion, 3% lower than the first quarter of 2013 and 24% lower than the fourth quarter of 2013. The decrease compared with the first quarter of 2013 was due to a decline in insurance reserves, reflecting the sale of the firm's Americas reinsurance business, as well as lower other expenses, primarily due to lower operating expenses related to consolidated investments.
• The first quarter of 2014 included net provisions for litigation and regulatory proceedings of $115 million compared with $110 million for the first quarter of 2013.

Capital

• Book value per common share was $154.69 and tangible book value per common share was $145.04, both approximately 1% higher compared with the end of 2013.
• During the quarter, the firm repurchased 10.3 million shares of its common stock at an average cost per share of $166.58, for a total cost of $1.72 billion.
• Tier 1 capital ratio was 16.3% and the firm's Common Equity Tier 1 ratio was 14.6% as of March 31, 2014.
• As of March 31, 2014, the firm's Common Equity Tier 1 ratio computed under this approach was 11.3%.

Reports Q1 (Mar) earnings of $1.28 per share, $0.02 better than the Capital IQ Consensus Estimate of $1.26; revenues rose 3.8% year/year to $9.68 bln vs the $9.74 bln consensus; organic sales +1%.

Co issues guidance for FY14, raises EPS to $5.40-5.55 from $5.35-5.55 vs. $5.54 Capital IQ Consensus Estimate; reaffirms FY14 revs +3-4% to $40.3-40.7 bln vs. $40.8 bln Capital IQ Consensus Estimate; reaffirms margins; raises FCF to $3.8-4.0 bln from $3.5-3.7 bln.

"We saw 3% organic sales growth ex-Defense & Space, with strong execution across each of the businesses driving earnings above the high-end of our guidance. We remain cautiously optimistic on the macro environment, even with some nice momentum exiting the quarter in our short-cycle and long-cycle businesses driving organic sales growth acceleration as we progress through the year."

Reports Q1 (Mar) earnings of $0.68 per share, $0.08 better than the Capital IQ Consensus Estimate of $0.60; revenues rose 9.6% year/year to $8.93 bln vs the $8.55 bln consensus.

• Income from continuing operations applicable to Morgan Stanley was $1.5 billion, or $0.72 per diluted share, compared with income of $981 million, or $0.49 per diluted share, for the same period a year ago. Results for the current quarter included positive revenue related to changes in Morgan Stanley's debt-related credit spreads and other credit factors (Debt Valuation Adjustment, DVA) of $126 million, compared with negative revenue of $317 million a year ago. Excluding DVA, net revenues for the current quarter were $8.8 billion compared with $8.5 billion a year ago. Income from continuing operations applicable to Morgan Stanley was $1.4 billion, or $0.68 per diluted share, compared with income of $1.2 billion, or $0.60 per diluted share, a year ago.
• Compensation expense was $4.3 billion compared to $4.2 billion a year ago. Non-compensation expenses were $2.3 billion compared to $2.4 billion a year ago.

Institutional Securities

• Reported pre-tax income from continuing operations of $1.4 billion compared with $799 million in the first quarter of last year. Net revenues for the current quarter were $4.6 billion compared with $4.1 billion a year ago.
• Advisory revenues of $336 million increased from $251 million a year ago reflecting higher levels of M&A activity.
• Equity underwriting revenues of $315 million increased from $283 million a year ago reflecting higher IPO volumes.
• Fixed income underwriting revenues of $485 million increased from $411 million a year ago reflecting an increase in loan fees.
• Equity sales and trading net revenues of $1.7 billion increased from $1.6 billion a year ago reflecting higher levels of client activity across products and particularly strong performance in prime brokerage.
• Fixed Income & Commodities sales and trading net revenues of $1.7 billion increased from $1.5 billion a year ago. Results reflect strong performance in commodities and solid results in credit and securitized products, despite lower volumes across most fixed income businesses.
• Other sales and trading net losses of $244 million compared with net revenues of $72 million a year ago, primarily reflecting costs related to the Firm's long-term funding.
• Value-at-Risk (VaR) was $50 million compared with $51 million in 4Q13.

Wealth Management

• Reported pre-tax income from continuing operations of $691 million compared with $597 million in the first quarter of last year. Net revenues for the current quarter were $3.6 billion compared with $3.5 billion a year ago.
• Asset management fee revenues of $2.0 billion increased from $1.9 billion a year ago primarily reflecting an increase in fee based assets and positive flows.
• Transactional revenues of $1.0 billion decreased from $1.1 billion a year ago primarily reflecting lower closed-end fund and other new issue activity.
• Net interest income of $539 million increased from $413 million a year ago on higher deposit and loan balances.
• Client assets in fee based accounts of $724 billion increased 17% compared with the prior year quarter. Fee based asset flows for the quarter were $19.0 billion.

Investment Management

• Reported pre-tax income from continuing operations of $263 million compared with pre-tax income of $187 million in the first quarter of last year. Net revenues of $740 million increased from $645 million in the prior year. Results primarily reflect higher gains on investments in Merchant Banking and higher results in Traditional Asset Management, partly offset by lower gains on investments in Real Estate Investing.
• Assets under management or supervision at March 31, 2014 of $382 billion increased from $341 billion a year ago primarily reflecting market appreciation and positive flows. The business recorded net flows of $6.0 billion in the current quarter.

Capital

• Morgan Stanley's Common Equity Tier 1 capital ratio was approximately 14.1% and its Tier 1 capital ratio was approximately 15.6% at March 31, 2014. At March 31, 2014, book value and tangible book value per common share were $32.38 and $27.41,18 respectively, based on approximately 2.0 billion shares outstanding.