Morgan Stanley sees an uptrend for many stocks with the announcement of its latest financial results. Earnings season is in full swing, with about a tenth of the S&P 500 companies reporting earnings over the past week. About 20% of the index plans to release results next week. Consensus estimates are for the S&P 500's third-quarter earnings per share to rise 3% year-over-year with sales growing 4% year-over-year, equity strategist Michelle Weaver wrote in a note Wednesday, which included the team's analysis. . “If Q2 patterns continue, companies will need to beat both EPS and sales in order to see positive price reactions; companies that missed sales estimates last quarter underperformed significantly,” she said. Here are five of Morgan Stanley's top 10 conviction plays, which the firm sees as near-term catalysts driving a “meaningful move” higher. Morgan Stanley sees a positive setup for Eaton and expects better results on all key performance indicators, including organic growth and margins in the Americas. “Eaton brings the strongest and broadest set of secular drivers across U.S. industrial industries, supporting recycling duration and positioning the business for sustainable (high single-digit) organic growth,” analyst Chris Snyder wrote in a company note. He added: “Our detailed organic growth supports flat organic growth of ~8% in 2025-26, nearly 200 basis points above consensus, driving EPS (mid-single digits) higher and calling for multiple expansion on sustained strength.” “. The $370 price target implies a 6% upside from Friday's close. Eaton is scheduled to report third-quarter earnings on October 29. Meanwhile, CNBC's four-time IPO, Lineage, which went public in July, should achieve a mid-single-digit same-store net operating income growth rate at the end of the year, analyst Ron Camden said. He said that the global leader in temporary warehouses has a high-quality portfolio and a distinguished technology platform. “We see a good entry point: The bulls have been waiting for (1) a potential turn in USDA data that could lead to margin improvement, which (we) expect in 4Q24 and 1H25; and (2) an acceleration potential external growth.” He wrote in the note. The $100 price target suggests shares could rise 29% from Friday's close. Lineage is expected to release third-quarter results on November 6. Finally, sentiment turned negative towards Microsoft ahead of its fiscal first-quarter earnings report thanks to concerns about increased capital expenditures, and a lack of visibility into AI revenue and gross margin. The pressure, analyst Keith Weiss said. “We see this as creating a 'wall of concern' against which the stock can work, as we expect to emerge from Q1 earnings with more visibility on Azure's path to accelerate to the high 30% range in F2H, and Copilot's credit for significantly boosting operating expense growth,” he said. More meaningful, single-digit growth to offset gross margin pressures.” The $506 price target suggests a 21% upside from Friday's close. The tech giant is expected to report its first-quarter financial results on October 30. — Contributed by Sarah Main From CNBC in reporting.
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These are Morgan Stanley's top plays for earnings season
