Talking Numbers

Morgan Stanley: Why earning will surprise to the upside

Morgan Stanley: Why earning will surprise to the upside
Morgan Stanley: Why earning will surprise to the upside

The moment of truth for the markets is here.

As investors lick their wounds after a bad week in the markets, a huge chunk of the S&P reports first-quarter results this week. Among those releasing numbers are Citigroup, Coca-Cola, Bank of America, Google, General Electric and Goldman Sachs.

Despite the negative tone the market has taken recently, one important strategist remains positive when it comes to earnings for the most recent quarter.

In a recent research note, Adam Parker, chief U.S. equity strategist at Morgan Stanley, said lowered earnings expectations will make it so companies "clear the lowered bar" this earning season.

(Watch: Last week's big stock selloff 'probably over': Pro)

"About 4½ companies have issued negative guidance for every one that's issued positive guidance," Parker told "Talking Numbers." "It's not about me being positive in absolute terms. It's about the expectations being set low enough that they can be exceeded. And, we think we'll see upside during the earnings season."

Parker sees improved earnings throughout the year as companies bring up their operating profits. And, he also expects more share buybacks.

"Our view is you're going to get about 6 percent operating earnings growth this year," said Parker.

"Companies look like they're going to buy back about 2 percent of their outstanding shares on a net basis. So, you get about 8 percent net earnings growth."

(Watch: Citigroup profit rises on narrower loss from troubled assets)

Besides growth, interest rates are another positive for stocks, and according to Parker, he sees the Federal Reserve keeping short-term rates low for the next 14 to 17 months at least.

"Equities are typically three to six months anticipatory of changes and news," said Parker. "What that does is it gives you this window—let's call it nine to 12 months—where an improving economy and improving earnings should be rewarded by the market."

To see the full discussion with Adam Parker on what's ahead for the market, watch the video above.

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