How are energy investors positioned?
On Thursday, Morgan Stanley (NYSE:MS) analysts revised their stance on Moelis & Company (NYSE:MC), downgrading the firm’s stock rating from Overweight to Underweight. Accompanying this change, the investment bank also reduced its price target for Moelis shares from the former $100.00 to the current $70.00.
The downgrade comes as Morgan Stanley analysts reassess the bull case for Moelis, finding it less likely to occur. They highlight Moelis as having the highest earnings beta within their coverage, indicating a greater sensitivity to market movements - confirmed by InvestingPro’s beta measurement of 1.42. This characteristic is further accentuated by the company’s compensation ratio, which is projected to be 64.5% for 2025, surpassing the peer range of 52.7-64.0%. Despite these challenges, the company maintains an impressive track record of 12 consecutive years of dividend payments.
Despite what Morgan Stanley describes as a "risk-off environment," Moelis has not underperformed its peer group as much as some might expect. Year-to-date, the company’s shares are down 18%, roughly in line with the median of its peers, while maintaining a strong gross profit margin of 92.4%. However, this performance contrasts with two companies that Morgan Stanley rates Overweight, Evercore (EVR) and Jefferies (JEF), which have seen their share prices drop by 28-30% in the same period. For deeper insights into Moelis’s competitive position, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed peer analysis and valuation metrics.
Morgan Stanley’s $60 base case scenario for Moelis assigns an 18x target price-to-earnings (P/E) multiple against 2026 estimated earnings per share (EPS) of $3.88, factoring in an adjusted compensation ratio of 62.5%. In a more pessimistic bear case scenario, the price target is set at $32, applying an 18.5x target P/E multiple to a 2026 EPS of $1.81 with an adjusted compensation ratio of 69.0%. Currently, the stock trades at a P/E ratio of 31.2x, with analysts forecasting EPS of $3.50 for 2025.
In other recent news, Moelis & Company reported a significant increase in financial results for the fourth quarter and full year ending December 31, 2024. The firm announced fourth-quarter revenues of $438.7 million, a 104% rise from the previous year, with full-year GAAP revenues reaching $1,194.5 million. In a strategic move, Moelis increased its quarterly dividend by 8% to $0.65 per share, reflecting its strong financial performance. Keefe, Bruyette & Woods raised its price target for Moelis to $92, citing a revenue beat that exceeded expectations by over $100 million. The firm maintained an Outperform rating, highlighting Moelis’ positive earnings call and constructive financial outlook.
Additionally, Moelis announced the internal promotion of Christopher Callesano as the new Chief Financial Officer, effective March 31, 2025. This leadership change follows the departure of Joseph Simon, the current CFO, who will transition to a new role at Wachtell, Lipton, Rosen & Katz. In another development, Moelis awarded its CEO, Ken Moelis, a $25 million retention grant to ensure leadership continuity. The award, part of the company’s 2024 Omnibus Incentive Plan, will vest in 2029, aligning the CEO’s interests with the company’s long-term performance.
Furthermore, Moelis disclosed the retirement of board member John Allison, ending his decade-long service on the Board of Directors. The company did not announce a successor following Allison’s departure. These recent developments highlight Moelis & Company’s strategic focus on leadership stability and financial growth.
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