MORGAN STANLEY: These 10 stocks are going to explode higher during earnings season

  • Morgan Stanley is expecting a strong third-quarter earnings season.
  • The firm has picked 10 stocks that it expects to soar as companies report their results.
  • “Our analysts believe that one or more imminent events will drive the share price materially over the next 15-60 days,” the bank said.

    Morgan Stanley is expecting a strong earnings season and has named 10 stocks that it believes are set to soar. For each of these stocks, the bank anticipates a near-term event to drive shares higher.

    “Our analysts believe that one or more imminent events will drive the share price materially over the next 15-60 days,” the report said.

    Michael Wilson, the bank’s chief US equity strategist, expects S&P 500 earnings will show growth of 19% during the reporting period. “Strong topline growth is also expected in 3Q, with consensus estimating S&P 500 sales to grow 7.2%,” he wrote in a note sent to clients on Tuesday.

    Financials are expected to be the biggest contributor to earnings growth at the index level, up 5.3%. Energy and tech are also projected to contribute substantially. This quarter marks the first earnings season for the newly formed GICS Communication Services sector, which is dominated by Google and Facebook. It is expected to contribute 1.7% earning growth at the index level.

    Below are the 10 stocks that Morgan Stanley says are poised to soar in the next two months.

    Anthem

    Ticker: ANTM

    Industry: Healthcare

    Price target: $368

    Current price: $276.96

    “We see tailwinds into 3Q including (1)Group MA which the company expects to more double by year end; (2) Government margin (3) Easy commercial margin company on y/y basis; and (4) Exchanges were a headwind in 2017,” the report said.

    Source: Morgan Stanley

    AT&T

    Ticker: T

    Industry: Telecom Services

    Price target: $37

    Current price: $33.77

    “The 3Q18 will be the first full quarter since the close of the Time Warner acquisition, which should provide more clarity on the new AT&T,” according to the Morgan Stanley.

    Source: Morgan Stanley

    Diamondback Energy

    Ticker: FANG

    Industry: Energy/utilities

    Price target: $168

    Current price: $133.27

    “Energen’s recent well performance has been prolific, with continued strength likely improving investor sentiment around the acquisition. FANG could provide an update on the process to monetize its midstream assets through Rattler Midstream Partners LP,” the report said.

    Source: Morgan Stanley

    DXC Technology

    Ticker: DXC

    Industry: Technology

    Price target: $103

    Current price: $88.20

    “We are bullish ahead of the Analyst Day, expected in early November when the management will likely provide updated medium-term guidance, drivers of incremental cost savings and company’s ability to demonstrate growth in the coming year,” the said report.

    Source: Morgan Stanley


    Eaton Corporation

    Markets Insider

    Ticker: ETN

    Industry: Consumer Discretionary/ Industrials

    Price target: $94

    Current price: $83.13

    “We expect 3Q18 EPS to be a positive catalyst as long cycle electrical businesses are still accelerating and should drive a 2019 framework 35% above current consensus EPS, which is currently at the low-end of that potential framework,” the report said.

    Source: Morgan Stanley

    Garmin

    Ticker: ETN

    Industry: Consumer Discretionary/ Industrials

    Price target: $94

    Current price: $83.13

    “3Q should demonstrate continued success in diversifying its hardware business; we believe Garmin is poised to drive continued share gains in Aviation above what is currently built into consensus estimates,” Morgan Stanley said.

    Source: Morgan Stanley

    Liberty Formula One

    Ticker: FWONK

    Industry: Media

    Price target: $42

    Current price: $32.49

    “We believe the company is set up well into the quarter FWONK benefits from two additional races vs.the year earlier period and likely some incremental revenue from a new sponsorship deal with AWS,” the report said.

    Source: Morgan Stanley

    Occidental Petroleum

    Ticker: OXY

    Industry: Energy/Utilities

    Price target: $80.97

    Current price: $81.70

    “We expect management to address additional buybacks on the 3Q18 call on November 6; wider differentials through 2019 could support an increase in share buybacks from $2 billion up to the fully authorized $5 billion,” the report said.

    Source: Morgan Stanley

    Ticker: PCG

    Industry: Energy/Utilities

    Price target: $66

    Current price: $48.27

    “The upcoming publication of the cause of the ~ $7B Tubbs fire should provide clarity on PCG’s potential exposure to wildfire liabilities; we estimate that the $10 B level of liability that is reflected in PCG stock exceed seven a bearish estimate of total potential liabilities,” the report said.

    Source: Morgan Stanley

    SVB Financial Group

    Ticker: SIVB

    Industry: Financials

    Price target: $370

    Current price: $314.14

    “SIVB is one of the few banks that we think could beat expectations. We see potential for some multiple expansion as it posts outsized loan growth and significant NIM (net interest margin) expansion at a time when both are becoming tougher for other banks to deliver,” the report said.

    Source: Morgan Stanley

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