As the third-quarter earnings season gains full momentum, Wall Street powerhouse Morgan Stanley is zeroing in on a select group of stocks poised for significant share-price movements following their upcoming quarterly reports. Investors are particularly attentive to corporate outlooks, navigating a landscape marked by rising operational costs and lingering uncertainties surrounding the pace of artificial intelligence (AI) spending.
Expectations for Q3 results are notably elevated. Data from Morgan Stanley reveals that among the initial 10% of S&P 500 companies to report, a mere 41% experienced positive stock reactions the day after their announcements. This underscores a challenging environment where companies face a higher bar to impress. Morgan Stanley analyst Michelle Weaver noted, "S&P 500 earnings revisions breadth (ERB) for FY2 is +11% heading into the season, down from the late-June peak of +28%. The two weeks into the start of earnings season are seasonally weak for ERB before it historically moves higher once reporting starts." She also highlighted robust earnings growth projections, with +33% expected in 2026 and +16% in 2027, alongside consensus sales growth of 11% and 8% for the respective years.
The firm has identified 14 stocks with strong near-term catalysts. A dozen of these are expected to see positive movements, while two face potential downside risks. Among Morgan Stanley's high-conviction bullish bets is **Western Digital**, set to report earnings on Thursday. Analyst Erik Woodring believes the market has overly discounted the company's fundamentals following recent underperformance, with shares down over 32% in the last three months. Woodring anticipates stronger-than-expected results driven by robust demand for hard disk drives and improving pricing. His December-quarter earnings estimate is approximately 10% above consensus, and his fiscal 2027 and 2028 estimates are an impressive 15% to 40% higher than Wall Street's projections. He maintains an overweight rating.
Another promising pick is **TeraWulf**, an AI infrastructure player scheduled to report earnings on November 6. Analyst Stephen Byrd sees significant upside potential, fueled by escalating demand for data center power capacity. Byrd highlighted TeraWulf's strong track record in securing agreements with data center clients and its management team's deep expertise in power infrastructure development. He argues that investors are significantly undervaluing the company's high-performance computing leases, which he estimates generate nearly twice the per-share value currently reflected in the stock. Byrd holds an overweight rating, citing TeraWulf's unique capabilities in large-scale power projects, lucrative contracts, and expanding grid access.
**Williams (WMB)** is also on Morgan Stanley's favored list, benefiting from AI-driven demand for electricity. Analyst Robert Kad forecasts robust earnings growth, projecting roughly 16% annual EBITDA growth through 2030, exceeding the company's own guidance of over 11%. Kad emphasized Williams' ability to provide turnkey power solutions to hyperscalers, seamlessly integrating natural gas supply, pipeline connectivity, and onsite generation, with rapid delivery timelines of 18-24 months post-contract. He maintains an overweight rating on Williams, which reports earnings on November 2.
