Morgan Stanley and Barclays name a slew of European stocks they expect to outperform going into earnings season. Barclays analysts said the outlook for equities is uncertain given factors like the Russia-Ukraine war, the French presidential election and Covid shutdowns in China, but noted that Europe "is back to record cheap valuations." The bank detailed its overweight picks in a research note titled "Conviction with Catalysts," dated April 14. Top of its list is luxury conglomerate Richemont , which the bank gave 36% potential upside to its 12-month price target. "We continue to find Richemont's equity story attractive: investor focus is on the top line and momentum remains solid there driven by the core brand Cartier," the analysts, led by Rob Bate, stated. Security firm Assa Abloy is also on Barclays' list, with analysts liking its forthcoming acquisition of Spectrum Brand's Hardware and Home Improvement division. "The resumption of M & A is key to the stock's rerating," they wrote. Analysts also like Assa Abloy's partnerships with the likes of Apple and said it has 29% potential upside to its 12-month price target. Luxury clothing company Moncler is an "attractive defensive play," the bank said, and analysts expect it to grow its outerwear division in the high single digits, with double-digit growth in other segments. Barclays gave the stock 21% potential upside to its 12-month price target. Scandinavian insurance company Tryg "represents a unique combination of defensive yield stock with significant growth potential," Barclays said, and is likely to beat its peers on both counts. The bank gave it an estimated 16% potential upside to its 12-month price target. Morgan Stanley's picks In a note from April 14, Morgan Stanley asked its analysts to name the stocks they think are most likely to surprise to the upside, where they have "particularly high conviction" that the market is not pricing the beat. Whitbread , which owns hotel chain Premier Inn, has seen demand recover "rapidly," the bank said, after flat revenues in the 6 weeks to January 6. The stock is on Morgan Stanley's "high conviction positive views" list. Also on the list is investment management firm Man Group . "Despite uncertain macro outlook and market volatility in Q1 2022, we expect Man to be relatively best positioned in a deteriorating environment," the analysts wrote. Professional services firm Elis makes the list too, with analysts expecting the business to see organic growth of 12% this financial year. Morgan Stanley also expects the management team at pharmaceuticals firm Novo Nordisk to update their guidance for the year. Cleaning and personal goods company Reckitt Benckiser is set to beat organic sales growth expectations, and analysts are above consensus for the quarter. "We expect 1Q22 earnings to deliver another headline beat albeit the magnitude of any positive surprise is likely to be considerably narrower than prior quarters given a more stagflationary backdrop, tougher comps and increasing margin pressures," the bank noted.
Traders at the NYSE, March 8, 2022.
Morgan Stanley and Barclays name a slew of European stocks they expect to outperform going into earnings season.