Morgan Stanley reveals its 8 favorite stocks ahead of Europe’s earnings season

Common Music Group’s operational headquarters in Santa Monica, California.

Bing Guan | Bloomberg | Getty Photographs

Morgan Stanley has named eight shares to purchase forward of a hotly anticipated earnings season in Europe.

Shares within the area have risen this 12 months on the primary indicators of moderating inflation throughout Europe. Nonetheless, the impression of sluggish progress and the conflict in Ukraine stays key considerations for traders.

Listed below are the European shares that the Wall Avenue financial institution thinks will outperform, even because the broader market is prone to take successful on earnings.

Morgan Stanley’s 8 European inventory picks

Firm Ticker Earnings date Foreign money Share value Worth goal Upside (%)
Common Music Group UMG-AMS 02-Mar EUR 23.43 35.00 49.38
Teleperformance TEP-PAR 23-Feb EUR 252.10 320.00 26.93
SCOR SCR-PAR 09-Feb EUR 23.83 30.00 25.89
Elis SA ELIS-PAR 02-Mar EUR 15.75 18.80 19.37
Sartorius SRT-ETR 26-Jan EUR 350.50 415.00 18.40
Accor AC-PAR 08-Mar EUR 29.19 34.00 16.48
SAP SAP-ETR 01-Mar EUR 106.58 123.00 15.41
Compass Group CPG-LON 26-Jan GBP 19.32 22.00 13.90

Supply: Morgan Stanley, Jan. 20

This is what they needed to say about 4 shares from the above desk:

Common Music Group – Music distribution

UMG reported 13.3% natural progress and beat expectations final quarter. The corporate additionally named former CEO of Paramount Photos Sherry Lansing as chair earlier this 12 months.

Morgan Stanley says:

“We count on the inventory to rally into earnings, due in early March. We predict consensus forecasts for Subscription & Streaming income progress and margins in 2023 are too low and imagine FY’22 earnings shall be a catalyst for a reassessment of each metrics by traders.”

Teleperformance – Outsourced buyer care

Teleperformance was investigated by the Colombian authorities after it was accused in a Time journal article of violating “the correct to dignity, work and social safety in the direction of staff” who average TikTok movies on the firm. Its personal inner audit recognized no vital hostile findings.

Morgan Stanley says:

“Teleperformance shares have been underneath scrutiny since November following the outbreak of damaging information move round its Content material Moderation in Colombia. We proceed to take care of that these dangers have been overblown and underlying Teleperformance stays a properly managed entity. Extra importantly none of this information move alters the basic progress and earnings profile of the corporate.”

Elis – Outsourced laundry companies

Elis beat market expectations in its third quarter on income and mentioned there was no slowdown in demand throughout the 29 nations it operates in. Following hovering power prices over the summer time, Elis additionally mentioned it had negotiated value will increase with prospects that will kick in between Oct. 2022 and Jan. 2023.

Morgan Stanley says:

“Elis provides resilient GDP+ progress via the cycle, which is predicted to be structurally larger put up COVID (pushed by elevated demand for hygiene, reliability, accountability and ESG).”

Accor – French hospitality firm

Accor is implementing what it calls an “asset gentle” technique in an effort to simplify its stability sheet. Final week, it bought a $460 million stake in China’s H World inns, which lowered its web debt. Following the asset disposal, Barclays fairness analysis group upgraded the inventory to a maintain.

Morgan Stanley says:

“We predict there’s a good tactical setup for Accor, with RevPAR [revenue per available room] information working forward of FY23 consensus (+4%) and the sale of H World serving to to deal with lingering considerations over operational and strategic focus.”

— CNBC’s Michael Bloom contributed reporting.

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