Morgan Stanley identifies 5 European stocks with downside risks ahead of earnings season

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The Wall Street bank believes stock markets have priced in a potential 'over-earning' thanks to the 10% rally in the Stoxx Europe 600 index this year.

Morgan Stanley analysts have identified what they say are five highly-profitable stocks in Europe with downside risk to their share prices ahead of first-quarter earnings results. The Wall Street bank believes stock markets have broadly priced in a potential "over-earning" and a "solid" first quarter, thanks to the 10% rally in the Stoxx Europe 600 index this year.

" The below table lists the five stocks "that may be over-earning," according to Morgan Stanley: Morgan Stanley's research suggests that the sectors most at risk of over-earning include transport, semiconductors, construction materials, energy, and autos. The investment bank analyzed these sectors across various profitability metrics and compared them to their 10-year historical averages, highlighting the potential risk of mean reversion.

 

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