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

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Universal Music Group’s operational headquarters in Santa Monica, California.
Bing Guan | Bloomberg | Getty Images

Morgan Stanley has named eight stocks to buy ahead of a hotly anticipated earnings season in Europe.

Stocks in the region have risen this year on the first signs of moderating inflation across Europe. Nonetheless, the impact of sluggish growth and the war in Ukraine remains key concerns for investors.

Here are the European stocks that the Wall Street bank thinks will outperform, even as the broader market is likely to take a hit on earnings.

Morgan Stanley’s 8 European stock picks

Company Ticker Earnings date Currency Share price Price target Upside (%)
Universal 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
Source: Morgan Stanley, Jan. 20

Here’s what they had to say about four stocks from the above table:

Universal Music Group – Music distribution

UMG

Morgan Stanley says:

“We expect the stock to rally into earnings, due in early March. We think consensus forecasts for Subscription & Streaming revenue growth and margins in 2023 are too low and believe FY’22 earnings will be a catalyst for a reassessment of both metrics by investors.”

Teleperformance – Outsourced customer care

Teleperformance

Morgan Stanley says:

“Teleperformance shares have been under scrutiny since November following the outbreak of negative news flow around its Content Moderation in Colombia. We continue to maintain that those risks were overblown and underlying Teleperformance remains a well managed entity. More importantly none of this news flow alters the fundamental growth and earnings profile of the company.”

Elis – Outsourced laundry services

Elis

Morgan Stanley says:

“Elis offers resilient GDP+ growth through the cycle, which is expected to be structurally higher post COVID (driven by increased demand for hygiene, reliability, accountability and ESG).”

Accor – French hospitality company

Accor

Morgan Stanley says:

“We think there is a good tactical setup for Accor, with RevPAR [revenue per available room] data running ahead of FY23 consensus (+4%) and the sale of H World helping to address lingering concerns over operational and strategic focus.”

— CNBC’s Michael Bloom contributed reporting.

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