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Currency Fluctuations, Chinese Slowdown Bleed into MS, IBM Earnings

Currency Fluctuations, Chinese Slowdown Bleed into MS, IBM Earnings

Ryan Cox, Contributor


Talking Points:

  • Morgan Stanley reported 3Q earnings that were 45.7 percent per share below analyst estimates of $0.62 per share
  • IBM’s revenue fell 14 percent in third quarter, impacted by currency fluctuations
  • Want free access to premium content on DailyFX PLUS? Sign up for a 14-day trial here

The US third quarter earnings season continued Monday with figures from Morgan Stanley (MS) and International Business Machine Corporation (IBM). Morgan Stanley was the final of the six major banks to report its third quarter earnings before the US open. IBM, one of the most valuable information technology firms, released its figures after the close.

To offer some clarity to a mixed showing from US banks, Morgan Stanley’s results came in under analyst estimates by a large margin. Morgan Stanley posted a profit of $1.02 billion, or $0.34 per share; when Wall Street expected the bank to hit $0.62 per share according to Bloomberg. The makes for a surprise of 45.7 percent lower the estimates. The banks year-over-year growth in revenue was down 15.65 percent. Morgan Stanley’s CEO James P. Gorman attributed volatility in global markets in the third quarter to a difficult environment impacting the banks fixed income business and Asia merchant banking business.

Over the weekend Chinese GDP came in at 6.9 percent below the long held 7 percent print for the first time since the financial crisis of 2008. The concerns over a slowdown in Asia continue to surface as firms like Morgan Stanley have attributed losses in revenue to aspects of the Asian markets and as many of the large banks have struggled from the weakness in the capital markets.

IBM posted a profit of $2.95 billion, or $3.16 per share. While IBM beat analyst estimates on bottom line profits, earnings per share missed expectations by 4.3 percent. To add to the miss IBM’s third quarter revenue fell 14 percent to $19.3 billion making it the 14th straight period of declines. The company forecasted in July that currency impact on revenue growth for the third quarter would be approximately 8 to 9 percentage points. IBM’s CFO Martin Schroeter stated today that currency fluctuations in the third quarter accounted for 9 points of revenue loss for the company. As the strong US dollar has trended upward IBM’s earnings have diverged, trending downward.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.