As third-quarter earnings season gains full momentum, Morgan Stanley has identified 14 stocks poised for significant market reactions, with 12 expected to benefit from positive catalysts. Despite high investor expectations and mixed early results, the firm’s analysts are bullish on companies like Western Digital, TeraWulf, and Williams, citing strong fundamentals and surging demand for AI infrastructure. Investors are closely scrutinizing corporate outlooks amid rising costs and evolving AI spending trends.
Third-quarter earnings season is now in full swing, and investment banking giant Morgan Stanley anticipates significant share price movements for several companies reporting in the coming weeks. Amidst rising operational costs and ongoing uncertainties surrounding artificial intelligence investments, investors are keenly observing corporate outlooks. Expectations for Q3 results are notably elevated.
Early indications suggest a challenging environment for companies to impress: only 41% of the approximately 10% of S&P 500 firms that had reported at the time of Morgan Stanley’s analysis saw positive next-day stock reactions. Morgan Stanley analyst Michelle Weaver highlighted this heightened bar, noting, "S&P 500 earnings revisions breadth (ERB) for FY2 is +11% heading into the season, down from the late-June peak of +28%." Weaver added that ERB typically experiences a seasonal dip in the two weeks preceding earnings season before rebounding once reports commence. Looking ahead, earnings growth is projected at +33% for 2026 and +16% for 2027, with consensus sales growth at 11% and 8% for those respective years.
Morgan Stanley has identified a select group of 14 stocks that its analysts believe possess near-term catalysts capable of driving substantial share-price shifts. Of these, twelve are expected to benefit from positive drivers, while two carry identified downside risks.
Among the bullish selections is **Western Digital**, with analyst Erik Woodring holding an overweight rating. Woodring argues that market expectations have unduly reset too low relative to the company's underlying fundamentals, especially following its recent underperformance (shares are down over 32% in the last three months). He foresees robust demand for hard disk drives and improving pricing trends supporting better-than-expected financials. Woodring's December-quarter earnings estimate stands about 10% above consensus, and his fiscal 2027 and 2028 estimates are an impressive 15% to 40% higher than broader Wall Street projections. Western Digital is scheduled to report earnings Thursday after the closing bell.
AI infrastructure play **TeraWulf** also features prominently on Morgan Stanley's list, with its earnings report due November 6. Analyst Stephen Byrd, who rates the stock overweight, believes the company is well-positioned to capitalize on the increasing demand for data center power capacity. Byrd commended TeraWulf's proven ability to forge agreements with data center clients and its management team's extensive expertise in developing diverse power infrastructure assets. Furthermore, Byrd asserts that the market is undervaluing the company's high-performance computing leases, which he estimates generate nearly double the per-share value currently reflected in its trading price. TeraWulf distinguishes itself through its large-scale power project experience, adeptness at securing lucrative customer contracts, and expanding access to grid capacity.
**Williams** is another favored stock, benefiting from the electricity demand surge driven by AI. Analyst Robert Kad, also with an overweight rating, forecasts that new data center power projects will bolster the company's earnings growth, projecting approximately 16% annual EBITDA growth through 2030, surpassing the company's own guidance of over 11%. Kad noted that "WMB offers turnkey power solutions to hyperscalers, integrating natural gas supply, pipeline connectivity, and onsite generation, with the ability to deliver power within 18–24 months of contract execution." Williams is set to report earnings on November 2.
