Morgan Stanley: 5 stocks that will beat the Street

Published Wed, Jul 20 20169:56 AM EDT

Morgan Stanley analysts advised clients to buy a group of stocks they are confident will pop on earnings. "For each of these stocks, our analyst has high conviction in a view that diverges from the Street's, and expects a near-term event to drive the stock as the market's view moves closer to ours," Tuesday's note read. Here are five names the investment firm believes have an edge. Sherwin-Williams (SHW), 1 year Source: FactSet Morgan Stanley analyst Vincent Andrews believes the paint manufacturer will surpass earnings expectations due to strong acceleration in same store sales. "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," Andrews wrote. The analyst believes an earnings beat could result in upward earnings revisions for the full year, which could take the stock to new highs. In the next 12 months, Morgan Stanley predicts shares of Sherwin-Williams could trade at $322, or 4 percent higher from Tuesday's close. Its bullish scenario, however, places the stock as high as $370, or 20 percent higher. The company will report quarterly results on Thursday. Priceline (PCLN), 1 year Source: FactSet Shares of the travel-booking website will benefit from the alternative accommodations boom pioneered by Airbnb more so than the rest of Wall Street believes, according to Morgan Stanley analyst Brian Nowak. "Priceline's top-line addressable market is expanding as the line between hotels and alt. accommodations increasingly blurs, and we believe Priceline has early leadership and traction in the vacation rental space," his note says. "Priceline's leading consumer reach, traffic acquisition and conversion capabilities, and growing selection of vacation rental properties position it to take share in the alt. accommodations market." In the next 12 months, Nowak said, Priceline shares could trade as high as $1,525, a 14 percent gain from Tuesday's close. The company is scheduled to release quarterly results on Aug. 4. NXP Semiconductor (NXPI), 1 year Source: FactSet Morgan Stanley analyst Craig Hettenbach believes earnings from the semiconductor maker will come in ahead of expectations due to increased demand for its products in areas like automobiles and mobile payments "NXP is a mixed-signal analog and microcontroller company with an above-average growth profile due to its exposure to secular growth themes such as increasing penetration of mobile payments, adoption of ADAS [Advanced Driver Assistance Systems] in automotive, and continued penetration of electronic documents in government applications," he wrote. The analyst notes a pickup in cash returns via additional buybacks and in the form of dividends as additional catalysts that could take the shares higher. In the next 12 month, Hettenbach predicts, the stock could trade as high as $105, a 29 percent gain from Tuesday's close. NXP Semiconductor is scheduled to report on July 27. Concho Resources (CXO), 1 year Source: FactSet Morgan Stanley analyst Drew Venker thinks the independent oil and gas developer is "ideally positioned" in the energy space to capitalize on improving trends. "Amid volatile macro, CXO offers attractive risk-reward: defensive oil price exposure near-term and offensive exposure by mid-2017 to early 2018 when we expect the recovery to crystalize," wrote Venker. "CXO has a strong balance sheet and best in class hedge portfolio, both of which should limit downside if oil prices retrench in the next 12-18 months." In the next 12 months, Morgan Stanley predicts, the stock could trade as high as $173, a gain of 42 percent from Tuesday's close. Concho Resources is scheduled to report quarterly results on Aug. 2. Hill-Rom (HRC), 1 year Source: FactSet The manufacturer of hospital beds and other medical products is projected to exceed analysts' earnings estimates due to strong sales and a broad market reach, according to Morgan Stanley analyst David Lewis. "Hill-Rom's sales base is now more diversified as exposure to the U.S. bed market has decreased by 50 percent, from ~20 percent to ~10 percent, following recent deals, and there are a number of drivers that should increase Hill-Rom's organic growth rate," wrote Lewis. An increase in capital expenditures from hospitals could also bode well for the firm, the analyst said. In the next 12 months, Morgan Stanley predicts shares of Hill-Rom could trade as high as $62, a premium of 23 percent from Tuesday's close. The company is scheduled to report quarterly results on Aug. 4

Source: Sherwin Williams

Morgan Stanley analysts advised clients to buy a group of stocks they are confident will pop on earnings.

"For each of these stocks, our analyst has high conviction in a view that diverges from the Street's, and expects a near-term event to drive the stock as the market's view moves closer to ours," Tuesday's note read.

Here are five names the investment firm believes have an edge.