Eight Stocks Are Attractive and Can Rally After They Report Earnings Soon, Morgan Stanley Says

Why It Matters

These picks point to where investors can capture outsized returns as earnings season shapes market direction, influencing portfolio allocation and sector sentiment. Strong beats from the highlighted firms could lift broader indices and set new performance benchmarks.

Key Takeaways

• 82% of S&P 500 earnings reports have exceeded expectations so far
• Morgan Stanley sees 24% upside for Affirm after expected margin boost
• Old Dominion’s operational leverage could drive a favorable earnings surprise
• Walmart expected to post higher U.S. comparable sales and income growth
• Eight selected stocks may lead market rally during upcoming earnings season

Pulse Analysis

The current earnings window is unusually robust, with FactSet data showing that more than four‑fifths of S&P 500 companies that have reported already outperformed consensus estimates. This high beat rate fuels investor optimism and encourages analysts to spotlight stocks that could amplify the rally. Morgan Stanley’s equity strategists, led by Michelle Weaver, applied a blend of quantitative screening and qualitative assessment—examining revenue trajectories, margin trends, and forward‑looking commentary—to curate a shortlist of eight candidates poised for post‑report gains.

Affirm, Old Dominion Freight Line and Walmart illustrate the diversity of drivers behind the bank’s confidence. For the fintech lender, an anticipated surge in gross merchandise volume and an investor‑day promise of higher margins suggest a turnaround after a 14% share decline this year, translating to a 24% upside target. Old Dominion’s asset‑light model offers scalable earnings growth, and its operational leverage could translate into a surprise earnings beat despite a modest hold rating. Walmart, meanwhile, leverages its massive brick‑and‑mortar footprint to deliver stronger‑than‑expected U.S. comparable sales, positioning the retailer for continued income acceleration and a modest 5% price‑target uplift.

For investors, the Morgan Stanley list serves as a tactical guide amid heightened volatility. Stocks that exceed earnings expectations often trigger short‑term price spikes, benefitting momentum‑focused strategies. However, analysts caution that upside projections embed assumptions about macro‑economic stability and consumer spending resilience. Portfolio managers should weigh the potential reward against sector‑specific risks—such as credit exposure for fintechs or freight demand fluctuations for logistics firms—while maintaining diversified exposure to capture the broader earnings‑driven market uplift.