XOM - The market may get volatile in a hurry - two consumer stocks to play defense with

2023-03-27 10:27:49 ET

Morgan Stanley thinks stocks could get more volatile as investors realize the dating earnings guidance across sectors looks unrealistic due to the events over the last few weeks.

Analyst Michael Wilson and team warned equity markets are at greater risk of pricing in much lower estimates ahead of any hard data changes in a development that mirrors the action with the quick swings in the bond market. The EPS revisions and resulting shock to price-to-equity ratios could catch many investors off guard.

As part of a reset, Morgan Stanley removed Exxon Mobil ( XOM ) and Simon Property Group ( SPG ) from the firm's Fresh Money Buy List and added Colgate-Palmolive Company ( NYSE: CL ) and Walmart ( NYSE: WMT ).

Morgan Stanley recently upgraded CL to Overweight on the view that organic sales growth is not fully reflected in valuation and that recent below consensus 2023 EPS guidance is actually clearly too conservative.

Morgan Stanley has an Overweight rating on WMT: "On fundamentals, the team sees increasing EPS visibility and expects stabilization from recent margin choppiness in 2H of F'23, with recapture opportunity in F'24/F’25 as top-line momentum persists (particularly in Grocery)."

Read the latest breakdowns on Walmart and Colgate-Palmolive from Seeking Alpha authors.

For further details see: