Ticonderoga Prefers Morgan Stanley (NYSE:MS) Over Goldman (NYSE:GS)

While liking both brokers, Ticonderoga said they prefer Morgan Stanley (NYSE:MS) over Goldman Sachs (NYSE:GS) at this time.

Ticonderoga said, "Lowering Goldman Sachs (NYSE: GS) Estimates Reflective of Tougher Trading and Equity Impairment; Initiating 2012. We are lowering our Q4 estimate to $4.00 from $5.85 previously. The revision is reflective of weaker trading and a $300 million goodwill mark in the equity trading business stemming from Spear Leeds. Banking should help to partially offset a tough relative trading quarter for GS. We are modeling Q4 total net revenues of $8.6 billion, down from $8.9 billion in Q3. For the quarter, we are modeling a compensation ratio of 26%, driving a full-year ratio of 39%, up -300 bps from last year. Our Q4 book value estimate is $131.29 with an implied ROE of 13.4%. Our initial 2012 EPS estimate is $17.63. We reiterate our Buy rating and $190 price target, or 1.4x next quarter book value.

"Adjusting Morgan Stanley (NYSE: MS) Q4'10, Raising 2011 and Initiating 2012. We are lowering our Q4 EPS estimate $0.01 to $0.60 per share. However, excluding a $700 million pre-tax gain, which we now are including, core EPS should be in the $0.30-$0.35 range. Note that this includes estimated CVA/DVA marks of $600-$700 million. Bright spots in the quarter will likely come from equity banking and trading, with some more improvement in retail and asset management. We expect book and tangible book value to end the year at $31.95 and $27.26, respectively. Net revenues should come in at $7.9 billion. We are raising our 2011 EPS estimate to $3.02 from $2.88 to reflect improvements in retail and asset management revenue. Our initial 2012 estimate is $3.16 per share. We reiterate our Buy rating and price target of $31, or 1.1x next quarter tangible book value.

"Seasonally Good Time for These Stocks. An improving economy, rising interest rates, and a likely strong Q1 (or at least a month or two months) for debt issuance markets should support this group. Historically, brokerage stocks perform well as interest rates begin to come off a low. We continue to like both but prefer MS."

Goldman Sachs closed Thursday at $172.21, down $1.79, or 1.03 percent. Morgan Stanley closed at $28.80, down $0.03, or 0.10 percent.