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Morgan Stanley: 11 High-Conviction Stocks To Watch This Earnings Season

Wayne Duggan

Earnings season is important for all stocks, but Morgan Stanley’s equity research team came out with a report earlier this week highlighting a dozen stocks they will be watching closely this earnings season.

The 11 stocks mentioned below each have earnings reports or other bullish catalysts that should drive share prices higher or lower within the next 15 to 60 days.

Here’s a rundown of the stocks Morgan Stanley is watching.

  • Caterpillar Inc. (NYSE: CAT): Bullish. Morgan Stanley is expecting a big first-quarter earnings beat from Caterpillar. Analysts say Wall Street hasn’t increased estimates despite strong intraquarter data points from the North American and Asian mining industries.
  • Clementia Pharmaceuticals Inc (NASDAQ: CMTA): Bullish. Morgan Stanley isn’t watching earnings, but rather anticipating positive results from the palovarotene study 202 part B OLE by the end of April. Analysts are looking for evidence that the Phase III trial could eventually produce results that lead to an approval.
  • Invitation Homes Inc (NYSE: INVH): Bullish. Morgan Stanley says same-store sales growth will be 5.7 percent, double the growth rate of peers. In addition, analysts say expense synergies could lead to upward earnings revisions.
  • Las Vegas Sands Corp. (NYSE: LVS): Bullish. Morgan Stanley says strength in the resurgent Macau market will drive a 2-percent earnings beat in Q1. An upcoming April 27 deadline for a Japanese casino implementation bill could be another positive catalyst for the stock.
  • Microsoft Corporation (NASDAQ: MSFT): Bullish. Morgan Stanley says Microsoft is likely to beat consensus expectations for revenue and gross margins. Analysts say the company could beat full-year gross margins and opex expectations.
  • PG&E Corporation (NYSE: PCG): Bullish. Morgan Stanley says the results of investigations into the 2017 Northern California wildfires will likely prove less damaging that the market is pricing into shares. In addition, analysts anticipate California will soon pass new laws addressing wildfire liability that will be favorable for PG&E.
  • Seagate Technology PLC (NASDAQ: STX): Bullish. Morgan Stanley says near-line HDD mix and low inventory levels will result in above-consensus Q1 gross margins of 31 percent. Analysts predict falling inventories will continue to boost margins and share price in Q2.
  • TE Connectivity Ltd (NYSE: TEL): Bullish. Morgan Stanley says revenue upside and opex discipline will generate EPS and guidance beats in the March quarter. In addition, recent checks suggest upside in the company’s transportation and industrial segments.
  • Thermo Fisher Scientific Inc. (NYSE: TMO): Bullish. Morgan Stanley says the macro environment for Thermo Fisher is extremely favorable at the moment. The company’s academic and government revenue is highly correlated to NIH funding disbursements, which are up sharply in the past six months.
  • Zoetis Inc (NYSE: ZTS): Bullish. Morgan Stanley says a positive mix shift will drive a 6-percent EPS beat. Morgan Stanley is calling for 13-percent revenue growth in the companion animal business and 8-percent growth in the livestock business.
  • Macerich Co (NYSE: MAC): Bearish. Morgan Stanley’s lone bearish prediction is that a tougher leasing environment will pressure trends and generate downside risk to Macerich’s results. The company’s high debt levels and rising financing costs aren’t helping the situation.

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