M IdeaTheme Trades | North AmericaConviction into EarningsThe consensus 4Q EPS estimate is down 7% over the past 3 months, creating a lowered bar and a higher probability of a solid, mid-single-digit EPS surprise for 4Q earnings. Against that backdrop, we highlight 12 stocks our analysts expect to move on a near-term event — 8 positively, 4 negatively. Morgan Stanley & Co. LLCMichelle M. Weaver, CFAEquity Strategist Michelle.M.Weaver@morganstanley.com +1 212 296-5254 Michael J WilsonEquity Strategist M.Wilson@morganstanley.com +1 212 761-2532 Andrew B PaukerEquity Strategist Andrew.Pauker@morganstanley.com +1 212 761-1330 Diane Ding, Ph.D.Quantitative Strategist Qian.Ding@morganstanley.com +1 212 761-6758 Nicholas Lentini, CFAResearch Associate Nick.Lentini@morganstanley.com +1 212 761-5863 Theme Picks POSITIVE CATALYST NEGATIVE CATALYST Amazon.com Highwoods Properties BellRing Brands Lincoln Electric CBOE Global Markets Re/Max Holdings IDEXX Laboratories RingCentral NOV Inc. SBA Communications Tenable Holdings Western Digital We see a higher probability of a solid, mid-single-digit EPS surprise for 4Q earnings as the consensus 4Q EPS estimate for the S&P 500 has come down 7% over the past 3 months. Over the past 2 weeks, we've seen positive inflections in revisions breadth for several cyclical areas—Transports, Diversified Financials, Autos, Banks, Materials and Consumer Durables. Interestingly, several of these areas of the market have lagged from a relative performance standpoint YTD, setting up a potential catch-up trade should revisions continue to show strength as companies offer more clarity on 2024. On the other side of the coin, Insurance, Telecom, Media & Entertainment, Consumer Services and Household Products have shown relative weakness from a revisions breadth standpoint over the past several weeks.We are focused most acutely on price reactions post reporting (which have been muted over the past 3 quarters) and the path of guidance/earnings revisions breadth as we progress through earnings season. Our focus will be on earnings revisions breadth across industry groups — in our view, this measure tends to be the best gauge of corporate guidance. The calendar 2024 consensus EPS estimate for the S&P 500 is down by a modest 1%, as consensus expects a rebound in growth, with 4Q24 expected to show the greatest Y/Y improvement (helped by the downward revision to the 4Q23 comparison figure). The revision pattern of the consensus 2024 S&P 500 EPS estimate over time sits above the historical trend; If history repeats, we would expect downward revisions through year-end, which would bring the consensus 2024 estimate ($243) more in line with our projection ($229), which in turn would set up a more meaningful inflection in 2025 EPS growth (+16%) than consensus currently models (+12.5%).Against that backdrop, we highlight 12 names for which Morgan Sta...
