Morgan Stanley: 3 stocks that will pop on earnings

Published Thu, Apr 14 20165:00 AM EDT

Morgan Stanley's research team pointed clients to a group of stocks it expects to rally this earnings season, citing a number of near-term bullish factors. "Our analysts believe that one or more imminent events will drive the share price materially over the next 15 to 60 days," read Tuesday's note, pointing to a select list of names with "high conviction going into earnings season." What makes the list unique, according to the report, is the firm's contrarian view of some of these stocks, with it significantly differing from the rest of the Street. First-quarter earnings reporting season kicked off this week with a smattering of results. The flow of releases really picks up next week. Here are some of the names that could be ready to pop on earnings. Source: FactSet "Amazon shares do not appropriately price Amazon's eCommerce business, which we see as the major driver of profit improvement near term," wrote Morgan Stanley analyst Brian Nowak. Based on his analysis, Amazon's accelerating revenue growth, expanding gross margin, prime membership expansion and improving profitability in the core e-commerce business are some of the positive catalysts that continue to propel the stock to new highs. Nowak also thinks that Amazon Web Services, the firm's cloud division which continues to experience major growth, will further boost profitability. Read More Paul Meeks on FANG stocks, other top ideas Shares of the online retailer are up 61 percent in the past 12 months, compared with a gain of 4 percent for the S & P consumer discretionary sector. Even with the strong gains in the past year, Nowak predicts the stock could trade as high as $950 in the next 12 months, implying a gain of more than 50 percent from here. The behemoth online retailer reports first-quarter earnings on April 21. Another name on Morgan Stanley's watch list is Ingersoll-Rand , a manufacturer of industrial products. Source: FactSet Ingersoll-Rand will show above-average growth in U.S. residential and commercial construction markets, according to analyst Nigel Cole. "Investors are concerned that the non-residential cycle cannot remain de-coupled from energy and industrial headwinds. We disagree," he wrote. Cole also thinks the stock trades at a discounted multiple to its peers, a metric as that could attract investors as they realize Ingersoll-Rand's growth potential. Read More 7 stocks that almost always rise on earnings Shares of ticker IR are down nearly 8 percent in the past year, compared with a flat return for the S & P industrial sector. Year to date, however, the stock is up almost 15 percent. Morgan Stanley's bull case scenario calls for a 25 percent rally in the stock to $79. That view differs from the rest of the Street, which has a consensus target price of $64, implying only a 1 percent gain from here. Ingersoll-Rand will report first-quarter earnings on April 26. Third on the list is paint-manufacturer Sherwin-Williams . Source: FactSet "Our long-term thesis relates to the company's structural advantages in a consolidating U.S. paint market, best-in-class pricing power, and asset-light/cash generative business model," wrote Morgan Stanley analyst Vincent Andrews. As potential catalysts, Andrews highlights accelerating metrics in same-store sales, additional product introductions and upbeat housing data. Shares of Sherwin-Williams hit a record price Wednesday, up nearly 25 percent from a recent low reached on Jan. 20. According to the analyst's estimate, the stock could trade as high as $370 or up 24 percent from here. That view differs from the rest of the Street, which has a consensus target price of $303, essentially where the stock is currently trading, according to FactSet. The paint maker will report first-quarter results on April 21. Other stocks that made the list include Alphabet , Burlington Stores and SVB Financial Group .

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Morgan Stanley's research team pointed clients to a group of stocks it expects to rally this earnings season, citing a number of near-term bullish factors.

"Our analysts believe that one or more imminent events will drive the share price materially over the next 15 to 60 days," read Tuesday's note, pointing to a select list of names with "high conviction going into earnings season."

What makes the list unique, according to the report, is the firm's contrarian view of some of these stocks, with it significantly differing from the rest of the Street.

First-quarter earnings reporting season kicked off this week with a smattering of results. The flow of releases really picks up next week.

Here are some of the names that could be ready to pop on earnings.