Morgan Stanley quants name 7 best stocks on earnings surprise metrics

Investing.com -- Morgan Stanley analysts have highlighted seven U.S. companies they believe are best positioned to beat earnings expectations in January, based on what the bank calls its “Earnings Surprise Composite” metric.

The quantitative team said the framework draws on signals from the “Earnings Forecast Landscape, Earnings Quality, and Broader Forecast Dynamics,” and forms part of its strategy for “systematically forecasting and monetising earnings surprises.”

Morgan Stanley said the approach has delivered a pre-cost Sharpe ratio of 1.35 in the U.S. since 2024.

At the top of the U.S. list is Western Digital, which the bank rates Overweight. It has a score of 1. It is followed by Halliburton, Cummins, Capital One Financial, Bank of America, Microsoft, and RTX.

All seven are rated Overweight by Morgan Stanley’s fundamental analysts, aligning the quant model with the bank’s broader research. The analysts said the stocks score highly on their ability to deliver earnings that exceed consensus forecasts.

For example, Halliburton carries a 0.97 score, while Cummins sits at 0.94 and Capital One at 0.88. Microsoft holds a 0.69 score and RTX a 0.68.

The bank said combining the quantitative framework with fundamental ratings provides a “quantamental” perspective designed to identify names poised for upside around earnings season.

Morgan Stanley said investors should view its research as “only a single factor” in decision-making but noted that its earnings surprise strategy has shown consistent performance, including a pre-cost Sharpe ratio of 0.74 in the U.S. since 2019.

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