Morgan Stanley is urging investors to take a more cautious stance on traditional asset managers as the industry approaches the first-quarter earnings season in mid-April. The firm adjusted its profit expectations across the coverage group, trimming near-term earnings-per-share forecasts and revising full-year projections downward.
Analyst Michael Cyprys reduced first-quarter EPS estimates by an average of 0.7%, which still leaves his Q1 forecasts roughly 1.2% above consensus. Morgan Stanley also lowered its full-year 2026 and 2027 EPS estimates by 3% each. Despite those changes aligning the firm broadly with Street expectations, Morgan Stanley noted that its operating income projections remain 1% to 2% below consensus.
The most notable first-quarter downtick was at BlackRock, where Cyprys trimmed his EPS estimate by 11.9% and cut the price target to $1,368 from $1,550, while keeping an overweight rating on the shares. In contrast, WisdomTree Investments registered the largest upward EPS revision at 4.2%.
Virtus Investment Partners saw the steepest reduction in valuation, with Morgan Stanley lowering its price target by 19% to $125. The firm said this adjustment reflects implied outflows that run at an annualized decay rate of roughly 26% in the first quarter.
On the flows front, Morgan Stanley pointed to sizeable industry activity: mutual fund and ETF flows total $309 billion quarter-to-date, a figure the firm said is more than double the comparable period a year earlier and is driven largely by ETFs. That contrast between robust aggregate flows and the firm-level revisions underpins the cautious stance.
Cyprys framed the view succinctly: "Lean cautious on the trads with sharp 14% points outperformance YTD vs rest of coverage, with market pricing in relatively more good news for trads. Yet we see risks"
The firm’s combined set of estimate trims, price-target changes and operating income positioning signals a more guarded outlook for traditional asset managers as the sector heads into its quarterly reporting window. Investors will likely watch upcoming earnings and flow disclosures closely to gauge whether the valuation headwinds highlighted by Morgan Stanley materialize.