Morgan Stanley's analysis indicates that the third-quarter earnings season is underway, with a focus on corporate outlooks as investors navigate rising costs and uncertainties related to artificial intelligence investments.
As of the firm's report, only 41% of the S&P 500 companies that had released earnings experienced positive stock reactions, suggesting a challenging environment for companies to meet high investor expectations. Analyst Michelle Weaver noted a decline in earnings revisions breadth for fiscal year 2022, dropping from +28% in late June to +11% as earnings season commenced.
Despite this, earnings growth expectations remain optimistic, with projections of +33% for 2026 and +16% for 2027. Morgan Stanley has pinpointed 14 stocks with potential catalysts for significant share-price movements, including Western Digital, which has seen a 32% decline in shares over the past three months.
Analyst Erik Woodring believes that expectations for the company have been overly pessimistic and anticipates strong demand for hard disk drives to drive better-than-expected results.
TeraWulf, set to report on November 6, is also highlighted for its potential growth due to increasing demand for data center power capacity, with analyst Stephen Byrd emphasizing the company's strong customer agreements and infrastructure experience.
Additionally, Williams is favored for its role in supporting AI-driven electricity demand, with analyst Robert Kad forecasting 16% annual EBITDA growth through 2030, surpassing the company's own guidance. Both TeraWulf and Williams hold overweight ratings from their respective analysts, indicating confidence in their future performance