Morgan Stanley has identified a list of stocks that investors should consider owning ahead of their quarterly earnings reports. According to Refinitiv, 76.1% of the 88 companies in the S&P 500 that have reported earnings as of Friday beat analysts’ expectations. CNBC Pro examined Morgan Stanley’s research and found the following companies to be the top stocks to buy going into earnings: Cinemark, WillScot Mobile Mini, Fortinet, McDonald’s, and Church & Dwight.
Cinemark, the movie theater chain, is one of the recommended stocks by analyst Benjamin Swinburne. Despite the pandemic, Morgan Stanley is confident in the future growth of the company, as the movie-going experience is still preferred by many. Swinburne expects a further increase in theatrical supply from studios and consumer demand for movie-going. Morgan Stanley has doubled down on shares of Cinemark, with an increased price target to $21 per share from $16, and a new bull case at $27.
WillScot Mobile Mini, a mobile office and storage provider, is being undervalued by the market, according to analyst Dillon Cumming. Despite a 6% decline in stock prices this year, the company is expected to show resiliency in its non-residential business. Morgan Stanley believes that the earnings report next week will be a positive catalyst for the company, as the weakness in credit-sensitive verticals like commercial, office, and lodging is expected to be more than offset by resiliency in public, manufacturing, and potentially power.
Church & Dwight, the consumer product company, is also among the recommended stocks by Morgan Stanley. While the earnings report is not expected to be a game-changer, the company is poised for “topline upside” heading into the first-quarter results. Morgan Stanley likes stocks that can deliver above-peer, and above consensus/market expectations long-term organic sales growth, and Church & Dwight fits the bill. Analyst Dara Mohsenian upgraded the stock back in January, citing margin expansion and sales growth upside.
McDonald’s, the fast-food giant, is expected to perform well regardless of the economic environment. Morgan Stanley sees the sales running ahead of consensus and Europe concerns receding, pushing the stock higher. The stock is already performing well, but the longer-term estimates may have gotten ahead of themselves on unit growth and G&A.
Fortinet, a cybersecurity and networking solutions company, is one of Morgan Stanley’s top picks. The company is still relatively defensible in uncertain times, and security demand remains resilient in 2023 based on the latest CIO survey and Q1 channel checks. Morgan Stanley favors consolidators with attractive FCF multiples, and Fortinet is expected to grow as a consolidator of security and broader networking spend.
In conclusion, these five stocks are recommended by Morgan Stanley as must-owns ahead of their quarterly earnings reports. The pandemic has not affected their growth, and the market is undervaluing some of these companies. Investors should keep an eye on these stocks and consider buying them before their quarterly earnings reports.
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