Morgan Stanley loves these stocks into earnings, while others on Wall Street do not


Dara Khosrowshahi, chief executive officer of Uber Technologies speaks on a webcast during the company’s initial public offering on the floor of the New York Stock Exchange, May 10, 2019.

Michael Nagle | Bloomberg | Getty Images

Morgan Stanley gave clients a bunch of earnings stock picks where the firm’s view differs from the rest of Wall Street.

The firm highlighted stocks including Uber and American Express, where it sees a chance for a rally within the next two months.

“For each of these stocks, our analyst has a view that diverges from the Street’s, and expects a near-term event to drive the stock as the market’s view moves closer to ours,” Morgan Stanley said in a note to clients Thursday.

Earnings season began this week with 64 S&P 500 companies reporting earnings as of Thursday morning, according to FactSet. Overall, Morgan Stanley said guidance for the second half of 2019 is too high and it expects companies to temper expectations for the rest of the year.

But there are some opportunities. Other stocks the firm is betting on into reports include PG&E and Gilead Sciences.

Morgan Stanley said many investors are worried about newly public ride-hailing company Uber’s path to profitability as well as “growth durability.” 

However, “we like this set-up…particularly as we’re entering a 2H of easing Y/Y ride sharing growth compares, an (assumed) relatively stable competitive landscape in the US and abroad, and a still-long runway,” analysts said. Uber’s ability to beat near-term ride sharing bookings is “key to turning investor sentiment and interest,” they said. 

Uber reports on August 8.

Morgan Stanley said next week it expects a judge to rule in PG&E’s favor regarding its exclusive right to offer a bankruptcy pre-organization plan, months after the deadly California wildfires. Analysts said the favorable ruling will remove overhang for the stock.

The firm’s analysts are betting that biotech company Gilead Science’s HIV franchise will help drive a beat on second-quarter revenue.

“We are also lower on 1H spending, which in combination with higher revenues would position GILD well for a 2Q19 EPS beat,” the analysts said. 

Gilead reports on July 30.

American Express is the only company on the Morgan Stanley’s list in the financial sector. The firm said it sees revenue growth recceleration for the company on the back of a “fading” U.S. dollar strength, strong retail sales growth, “wealth effect on Amex cardmember spending,” and low interest rates.

American Express reports July 19.

On the bearish side, Morgan Stanley see’s near-term downside for industrial supply company W.W. Grainger. Analysts said the company will be forced to lower prices as “underlying demand appears to have decelerated.”

— with reporting from CNBC’s Michael Bloom

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