As the first-quarter earnings season approaches its conclusion, Morgan Stanley highlights a selection of stocks that investors can still leverage for potential post-results appreciation. With a significant majority of the S&P 500 companies having already reported, the market has seen a strong trend of positive earnings surprises (nearly 85%) and revenue beats (78%). However, Morgan Stanley's focus remains on companies yet to release their results.
In a recent analyst note, the financial institution unveiled a curated list of stocks from the MSCI U.S. index. These selected companies are scheduled to report earnings between May 7 and June 2, are rated 'overweight' by Morgan Stanley's equity analysts, and score highly on their proprietary Earnings Surprise Composite metric.
Key Picks and Analyst Insights
Ulta Beauty (ULTA)
Expected to report on Monday, June 1, Ulta Beauty has received a boost from Bank of America, which upgraded the stock to 'buy' from 'neutral'. Analyst Lorraine Hutchinson views the beauty retailer as an attractive investment, particularly after a recent price pullback. Hutchinson believes Ulta is well-positioned to benefit from strategic investments made in store renovations, IT systems, its 'Wellness by Ulta' expansion, and international growth. Despite shares being down 12% year-to-date and 24% in the past three months, the analyst sees the stock as a high-quality compounder trading at a discount to its peers, with a price target of $685, suggesting a 29% upside.
Target (TGT)
Retail giant Target is slated to release its earnings on Tuesday, May 19. While shares have seen a notable rebound of 32% this year following declines in previous years, Citigroup maintains a 'neutral' rating but increased its price target to $133 from $117. Analyst Paul Lejuez noted that sentiment surrounding Target has improved significantly, with the stock outperforming its sector peers over the last three months. However, he cautions that the 'bar is unusually high,' and any results or outlook falling short could be perceived negatively.
Applied Materials (AMAT)
Chip equipment manufacturer Applied Materials is set to report its results on Wednesday, May 13. Morgan Stanley analyst Shane Brett reiterated his 'overweight' rating, expressing confidence in the company's ability to meet or exceed expectations. Brett described the company's January print as a 'leap in the right direction' and anticipates the upcoming report will be another significant step forward. With a revised price target of $454 (up from $432), the stock offers nearly 11% potential upside, having already surged 66% this year.
Other Notable Mentions
Morgan Stanley's list also includes prominent technology giant Nvidia and agricultural machinery leader Deere & Co., further underscoring the bank's strategic outlook on companies with strong earnings potential.
