These are Morgan Stanley’s favorite stocks as the earnings season rolls on

Published Tue, Jul 20 20212:19 PM EDTUpdated Wed, Jul 21 20214:06 PM EDT

This earnings season is a stock picker's market, and Morgan Stanley's analysts are bullish on a handful of names they believe are winners. The earnings season kicked off last week . About 85% of the S & P 500 companies that have reported thus far have beaten estimates, according to FactSet. Morgan Stanley chief U.S. equity strategist Mike Wilson believes that earnings will surprise to the upside in 2021, but that valuations will come down to offset some — if not all — of the positive earnings revisions. "Stock selection will be key to outperformance," he said. Against that backdrop, Morgan Stanley highlighted a handful of companies that it believes will see their share price rise materially in the event of an earnings upside surprise. Take a look at the bank's list here: Morgan Stanley analyst Betsy Graseck said consensus is still underestimating how consumer spending will affect earnings for American Express . Credit-card spending is ramping up as the vaccine rollout continues, and large-cap banks reported seeing 40% to 50% year-over-year increases in card spending, she found. "Amex is the biggest beneficiary of higher card spending given more of a swipe-fee focus with less reliance on lending, but nonetheless should see very strong card loan growth of 7% [year-over-year]," Graseck said. Delta Air Lines also mentioned on their earnings call last week they are seeing very strong growth coming out of their Delta/Amex co-branded card, she added. Morgan Stanley has a $171 per share price target on American Express. Real estate companies Cushman & Wakefield and Simon Property Group also earned spots on Morgan Stanley's earnings list. The firm sees upside for Cushman & Wakefield due to leasing and capital market revenue. Morgan Stanley's second-quarter estimates are 20% higher than the Street for Cushman. The bank sees high vaccination rates in the U.S., combined with leasing decisions pushed out from last year, benefiting the commercial real estate firm. Morgan Stanley has a $19 per share price target on Cushman & Wakefield. Mall operator Simon Property Group should beat and raise during the second quarter, according to analyst Richard Hill. "While retail faces accelerating secular challenges, we see multiple drivers of earnings growth for SPG and a multiple that screens cheap relative to strip [real estate investment trusts] and retailers themselves," Hill said. "Rent from tenants that have made it through COVID-19 should provide a stable cash flow where earnings grow again." Morgan Stanley has an $150 per share price target on Simon Property Group. Gogo also made the list, as the bank believes that the in-flight internet company experienced strong demand in the private travel industry as the pandemic lockdowns lifted. "Management noted that customer traffic trends by customer segment were up by 106%-144% vs 2019 levels and that after market equipment demand was very strong," Morgan Stanley analyst Simon Flannery told clients. "More recently, fractional ownership provider NetJets announced in early July that it had 'temporarily suspended' light jet sales due to 'unprecedented demand in the private travel industry'." Morgan Stanley has a $13 per share price target on Gogo. Gartner , dLocal, NCR Corp. , SVB Financial and Skechers also earned spots on Morgan Stanley's high-conviction earnings list. — with reporting from CNBC's Michael Bloom.

Source: American Express

This earnings season is a stock picker's market, and Morgan Stanley's analysts are bullish on a handful of names they believe are winners.