2025 has just begun, and the US dollar has already become a hot topic in the New Year. The U.S. dollar has strengthened over the past few months, spurred by economic tariffs proposed by President-elect Donald Trump. The U.S. dollar index, which measures the greenback against a basket of similar currencies, had risen more than 6% as of Monday’s close since the November election. Michael Wilson, chief U.S. equity strategist at Morgan Stanley, expects currency headwinds to intensify this earnings season, especially for stocks with higher exposure to overseas markets. “That said, given the wide variation in foreign sales exposure across the index, a stronger dollar may not be a determinant of earnings results at the index level but rather a factor at the stock level,” he said. “All in all, a stronger dollar is generally not the explanation The key variable for index (earnings per share) growth/performance over time, although it can be an important factor for stocks with higher exposure to foreign income, Wilson said, in order to hedge against this potential headwind. Stocks with relatively low overseas sales exposure and low sensitivity to a stronger U.S. dollar from an EPS growth perspective.” “This group has begun to outperform on a relative basis since the dollar began to strengthen in October, and we expect this outperformance to continue as earnings season progresses,” the strategist wrote in the note. , Morgan Stanley provides a list of those that meet this criteria. To be included in the table below, a stock must meet the following requirements: Be a member of the S&P 1500 Index Be assigned an Overweight rating by Morgan Stanley Have less than 15% foreign revenue exposure Have earnings per share rise against the U.S. dollar index over the next 12 months One name on the least sensitive list is pet retailer Chewy. As of Monday’s close, the company’s shares had risen 87% in the past 12 months. Evercore ISI agrees with Morgan Stanley’s bullish stance. On Sunday, Evercore ISI analyst Mark Mahaney upgraded the stock to outperform from consensus. “We believe the pet industry has largely stabilized and CHWY is well-positioned to achieve synchronized or better growth in a potential market recovery,” he wrote. “Recent industry data, combined with CHWY’s specific initiatives and future product catalysts , supports our constructive view on CHWY’s ability to accelerate growth in FY25 and sustain durable revenue growth, active user growth and profit expansion in the coming years, according to 31 analysts surveyed by the London Stock Exchange Group (LSEG). Among analysts, 19 rate the stock a “buy” or “strong buy,” with a consensus price target of more than 2%. In the communications services sector, Morgan Stanley sees AT&T as another attractive stock. Shares of the telecom giant were up more than 30% in the past year as of Monday. Earlier this month, Deutsche Bank reiterated that it was a top pick for the new year. The bank upgraded AT&T stock to overweight from industry weight, citing “increased confidence in growth initiatives and shareholder return prospects.” According to LSEG, 17 of the 29 analysts covering AT&T have “buy” or “strong buy” ratings, and the consensus price target suggests an upside of 16%. Another stock on Morgan Stanley’s list is Northrop Grumman. As of Monday, aerospace and defense stocks had fallen nearly 2% in the past 12 months. Last week, Wells Fargo upgraded Northrop Grumman stock to “overweight” from “equal”, citing the company’s attractive defense portfolio. “NOCs provide less material to Ukraine than other countries and should be less affected as the conflict is expected to be nearing an end. Due to lower investment, higher pensions and a reduced (research and development) tax hit, ( free cash flow) could double by 2028. Twelve of 25 analysts surveyed by LSEG have buy or strong buy ratings, with a consensus price target of 16% upside. . Other companies on Morgan Stanley’s list include Home Depot and UnitedHealth Group.
Morgan Stanley lists stocks immune from this growing market threat | Real Time Headlines
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