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Friday, March 29, 2024

Morgan Stanley Expecting Strength From Hardline Discount Retail

Courtesy of Benzinga.

Morgan Stanley on Wednesday offered their Year-Ahead Outlook, saying that the hardline/discount group will outperform in 2015.

In the report Morgan Stanley focuses on, three key narratives that they believe will play out in the economy.

  1. The first is that there will be further macroeconomic gains. Analysts cite the ongoing housing recovery and the fall in gas prices, which increases consumer wealth while at the same time increasing their discretionary income.
  2. The second is, “new analysis that shows omni-channel transformations gaining steam and nearing positive EBIT margin inflections.”
  3. The firm believes that there will be stocks with favorable risk/reward opportunities. This is mainly due to consolidations within specific industries, the most notable of which is the oil industry as companies fight to increase operational efficiency and remain profitable.

Related Link: Here's Who Benefits The Most If Sears Goes Bankrupt

While Morgan Stanley believes that the above points show potential outperformance in the economy, they point out, “elevated valuations could narrow the magnitude of the group's outperformance in 2015 as earnings growth will likely be a larger contributor than multiple expansion.”

Analysts say that higher interest rates will not hold back home improvement companies from outperforming. As such, Morgan Stanley sees attractive risk/rewards for companies such as Lowe's Companies, which should take advantage of the forecasted housing recovery.

Posted-In: Morgan StanleyAnalyst Color Analyst Ratings

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