LONDON — Morgan Stanley has named the stocks that its analysts predict will be the best performers — and under-performers — ahead of their earnings reports.
The research analysts said they expect fourth-quarter earnings to be moderate relative to the rebound seen in the third quarter of 2020, given lockdown restrictions seen throughout Europe in the last few months.
“However, we believe numbers are achievable and 4Q (fourth quarter) should deliver a positive surprise,” the analysts said, highlighting “13 stocks where MS Research analysts have high conviction ahead of the results.”
Morgan Stanley noted that its quarterly survey was positively skewed, with analysts seeing “modest upside risks in fourth quarter, especially for Autos, Beverages, Business Services, Chemicals, Internet, Semiconductors and Freight.”
Conversely, they identified “downside risks for Aerospace & Defense, Infrastructure, Leisure, Med Tech, Software and Airlines.”
Led by Ross A. MacDonald, the analysts said they had high conviction on 13 stocks going into earnings season. Of these, they had a positive view on eight: Consultancy firm Capgemini, energy firm EDF, Evolution Gaming, investment management firm Man Group, Norwegian aluminum and renewable energy company Norsk Hydro, Santander, Siemens Healthineers, and Trelleborg, a global engineering group.
The first of these to report will be Siemens Healthineers, which publishes its first quarter results on Monday.
Meanwhile, the analysts had a negative view on Danish engineering company FLSmidth, Dutch banking group ING, French industrial group Legrand, Straumann, which specializes in restorative dentistry, and Worldline, a French payments company.
Morgan Stanley conducts a survey of its sector analysts ahead of every results season, asking them to identify where they think results are likely to come in, relative to consensus expectations for each sector, and also where they have conviction into results.
Noting that fourth-quarter results “should be decent,” they cited four factors as a reason for their positive outlook including continued resilience in the economic data, a foreign exchange drag “less pertinent” in the fourth quarter and its analysts’ expectations being positively skewed.
Lastly, they said that fourth-quarter expectations had been very resilient among their analysts: “Much like we observed last quarter, it is typical for consensus expectations to come down in the weeks immediately preceding reporting season. However, as was the case last quarter, consensus expectations for 4Q have actually barely moved in recent weeks.”
