Earnings season is in full swing. These are Morgan Stanley's highest conviction plays
Morgan Stanley expectsseveral stocks reporting earnings in the coming weeks to make significant moves following their quarterly releases. The third-quarter earnings season is gaining momentum, with investors closely watching corporate outlooks amid rising costs and uncertainty surrounding artificial intelligence spending. Expectations are high for Q3 reports. Among the roughly 10% of S & P 500 companies that had reported at the time of the firm’s analysis, only 41% saw positive next-day stock reactions. A higher bar could make it harder for companies to impress investors, said Morgan Stanley analyst Michelle Weaver. “S & P 500 earnings revisions breadth (ERB) for FY2 is +11% heading into the season, down from the late-June peak of +28%. The two weeks into the start of earnings season are seasonally weak for ERB before it historically moves higher once reporting starts,” wrote Weaver in a Tuesday note. “Earnings growth expectations now call for +33% in 2026 and +16% in 2027. Consensus sales growth is 11% for 2026 and 8% for 2027.” Morgan Stanley highlighted 14 stocks that the firm’s analysts believe have near-term catalysts capable of driving meaningful share-price moves. Twelve of those have positive catalysts, while two face downside risks. Western Digital is one of Morgan Stanley’s bullish picks heading into earnings. Analyst Erik Woodring said expectations have reset too far relative to fundamentals following the company’s recent underperformance. Shares are down more than 32% over the past three months. Woodring expects strong demand for hard disk drives and improving pricing to support better-than-expected results. The analyst’s December-quarter earnings estimate is about 10% above consensus, while his fiscal 2027 and 2028 estimates are 15% to 40% higher than Wall Street’s projections. Woodring has an overweight rating on Western Digital, which reports earnings Thursday after the bell. AI infrastructure play TeraWulf , which is set to report earnings Nov. 6, is also on the list. The company could benefit from growing demand for data center power capacity, according to analyst Stephen Byrd. “TeraWulf has a strong track record of signing agreements with data center customers, and the management team has extensive experience in building a wide range of power infrastructure assets,” wrote Byrd. Byrd said investors are undervaluing the company’s high-performance computing leases, which he estimates generate nearly twice the per-share value reflected in the stock’s trading price. Byrd said TeraWulf stands out from its peers because of its experience building large-scale power projects, its ability to secure lucrative customer contracts and its growing access to grid capacity. The analyst has an overweight rating on TeraWulf. Williams is another stock Morgan Stanley favors as AI drives demand for electricity. Analyst Robert Kad expects new data center power projects to support earnings growth, forecasting roughly 16% annual EBITDA growth through 2030, above the company’s guidance of more than 11%. “WMB offers turnkey power solutions to hyperscalers, integrating natural gas supply, pipeline connectivity, and onsite generation, with the ability to deliver power within 18–24 months of contract execution,” Kad wrote. Kad has an overweight rating on the company, which reports earnings Nov. 2.
