Morgan Stanley’s Top Stock Picks for Q2 Earnings: GE Vernova, United Airlines, and Lam Research Poised for Upside

As earnings season kicks into high gear, Wall Street giant Morgan Stanley has identified a select group of stocks poised for significant upside, forecasting positive profit surprises and potential guidance raises. With 28 S&P 500 companies, including major banks, slated to report this week, investor attention is keenly focused on corporate performance. The broader market remains within touching distance of its June all-time highs, underscoring the importance of strong earnings to maintain momentum.

Morgan Stanley's analysts rigorously screened for companies they rate "overweight" – indicating a bullish outlook – and that are anticipated to surpass analyst estimates on key performance indicators. The firm also prioritized stocks expected to either lift their forward earnings guidance or benefit from upward revisions to analyst estimates following their upcoming financial disclosures. Here’s a closer look at the names that stood out in their rigorous screening process:

GE Vernova: Powering Ahead

Morgan Stanley expects shares of GE Vernova to climb, particularly if the energy infrastructure giant issues an earnings forecast exceeding expectations, propelled by new gas turbine contracts. The stock has already seen a remarkable 64% surge year-to-date, driven by escalating artificial intelligence investments that are fueling demand for robust energy infrastructure. Earlier this year, GE Vernova's CEO indicated that the company anticipates selling out its turbine reservations through 2030, signaling strong long-term demand.

Further bolstering its outlook, GE Vernova is positioned to benefit from broader industrial tailwinds. Michael Wilson, a Morgan Stanley analyst, noted on Monday, "The industrial backdrop continues to strengthen. Capex is broadening beyond data centers … [and] reshoring progress suggests the U.S. industrial economy may be entering a sustained growth cycle as international production becomes more expensive than domestic." Investors should mark July 22, when GE Vernova is scheduled to unveil its second-quarter results.

United Airlines: Soaring Through Turbulence

United Airlines could gain significant altitude following its upcoming earnings report, especially if it delivers a robust financial outlook for the remainder of the year, according to Morgan Stanley. The airline's shares have already appreciated 24% over the last three months, a testament to resilient travel bookings despite a backdrop of flight disruptions and higher ticket prices, partly linked to the Iran war.

Morgan Stanley's airline analyst highlighted the sector's strength: "Airline demand and booking intent remain healthy, with seven consecutive price increases absorbed without demand destruction." While falling oil prices might alleviate cost pressures, the analyst suggests airlines are unlikely to roll back pricing. The crucial test will be the sustained robustness of demand. United Airlines is set to release its second-quarter earnings on Wednesday.

Lam Research: Riding the AI Wave

Lam Research, a critical player in semiconductor manufacturing equipment, is forecast to rally post-earnings, particularly if it provides an optimistic revenue outlook for the current quarter. The company’s shares have impressively more than doubled this year, soaring 102%, fueled by the relentless artificial intelligence boom.

"AI demand remains robust with rising token prices and continued strength across the ecosystem despite recent market pullbacks," a Morgan Stanley analyst observed in a recent note. The report also pointed to "improving" new equipment orders, signaling positive momentum. Lam Research is scheduled to report its earnings on July 29.