Morgan Stanley names its 'high conviction' global stocks ahead of earnings

Published Fri, Apr 23 20212:14 AM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Morgan Stanley is very positive on a number of global stocks that are set to report earnings in the coming weeks. A dozen analysts from the Wall Street bank named their "high conviction" European stocks in a note published Monday. "The positive skew across the research floor is close to an all-time high," it stated. The bank expects first-quarter results to be even better than the "very strong" earnings beats for U.K. and European companies in the fourth quarter of 2020. Morgan Stanley's top stock picks include: Norwegian metals firm Norsk Hydro is a pick for the bank, as it expects an "upbeat" outlook for the second quarter with a likely "positive surprise" in its aluminum division among others. Morgan Stanley also expects the company's management to announce good news around its move towards decarbonization when it announces results on April 27. Banking group Lloyds has more than 20% of the U.K.'s market share of mortgages and is set to do well from a high level of approvals, according to Morgan Stanley, which expects a strong quarter. The analysts are 5% ahead of consensus on pre-provision operating profit — a measure of income a bank earns before funds set aside to cover future debts. Lloyds reports earnings on April 28. Rival Natwest is Morgan Stanley's top U.K. pick, with analysts expecting a strong set of results due to mortgage approvals reaching record highs in the fourth quarter of 2020 and a temporary reduction in stamp duty, a tax payable when buying a property. The analysts also like Natwest's plan to grow market share. It reports on April 29. French bank BNP Paribas is a pick for Morgan Stanley, as it expects it to outperform banks in the eurozone "thanks to the resilience of its business model" especially in its investment banking and fixed income divisions. The bank's earnings are due on April 30. Spanish steel manufacturer Acerinox is favored by Morgan Stanley for its improved margins and "stronger pricing power" in a "buoyant" stainless steel market. Morgan Stanley estimates a 2021 dividend yield of 6.1% versus its peers, which are seen coming in at between 0% and 4.7%. The company reports on May 11. Morgan Stanley likes Coca-Cola Hellenic Bottling Company (HBC) for its strong full-year 2020 results, which showed "superior agility and execution." The bank forecast first-quarter organic sales up 5.5% on the previous quarter, above consensus of 0.4%, and noted its "strong momentum" in emerging markets such as Russia and Nigeria. The company's results are out on May 12. The analysts noted that 39% of European companies beat earnings per share (EPS) estimates by 5% or more in the fourth quarter of 2020, and said the first quarter of the year should be "even stronger." The bank is also positive on the outlook for the full year. "A strong Q1 outcome should underpin investor confidence in a broader recovery through 2021/22; however the pace of upgrades is likely to slow post this quarter," Morgan Stanley's note stated.

A worker during a steel pour

Monty Rakusen | Cultura | Getty Images

Morgan Stanley is very positive on a number of global stocks that are set to report earnings in the coming weeks.

A dozen analysts from the Wall Street bank named their "high conviction" European stocks in a note published Monday. "The positive skew across the research floor is close to an all-time high," it stated.

The bank expects first-quarter results to be even better than the "very strong" earnings beats for U.K. and European companies in the fourth quarter of 2020.

Morgan Stanley's top stock picks include: