Alcoa
Ticker: AA
Primary Industry: Metals & Mining
Price Target: $20
2015 Price to Earnings: 14.6
Comment: "We are Overweight on AA because we believe Alcoa’s upstream business has bottomed and margins should expand, driven by both higher pricing (stronger supply-demand fundamentals for key commodities) and lower costs (production cuts at high-cost facilities and start-up of low-cost operations)," wrote Morgan Stanley's Paretosh Misra.
Source: Morgan Stanley
Ally Financial
Ticker: ALLY
Primary Industry: Banking & Financial Services
Price Target: $30
2015 Price to Earnings: 11.0
Comment: "In an extended economic upcycle, we would expect “stronger-for-longer” job growth to drive a bull case outlook for auto originations, credit, and lease economics," wrote Morgan Stanley's Betsy Graseck.
Source: Morgan Stanley
American Express
Ticker: AXP
Primary Industry: Banking & Financial Services
Price Target: $110
2015 Price to Earnings: 15.3
Comment: "The vast majority (80%) of AXP’s value is driven by spend, and in a longer-than-expected economic upcycle, we would expect spend to accelerate from the current 9% level to 12%," wrote Morgan Stanley's Betsy Graseck. "Higher spend should drive up Amex’s revenue growth from 5% up to 8%-plus."
Source: Morgan Stanley
Autodesk
Ticker: ADSK
Primary Industry: Technology/Software
Price Target: $65
2015 Price to Earnings: 52.1
Comment: "With construction and manufacturing representing ~90% of business, Autodesk is the most cyclically-exposed name in the Software group, in our view," wrote Morgan Stanley's Keith Weiss.
Source: Morgan Stanley
Automatic Data Proc.
Ticker: ADP
Primary Industry: IT Services
Price Target: $77
2015 Price to Earnings: 29.2
Comment: "A longer-than-expected macro cycle would lead to higher-than-expected job creation, which would benefit ADP’s payroll and profession employer organization (PEO) business lines," wrote Morgan Stanley's Smittipon Srethapramote. "A longer-than-expected macro cycle would also likely lead to an increase in interest rates, which would positively impact ADP’s ability to generate a higher amount of float income."
Source: Morgan Stanley
Bank of America
Ticker: BAC
Primary Industry: Banking & Financial Services
Price Target: $21
2015 Price to Earnings: 10.4
Comment: "Assuming a persistent multi-year economic upcycle, we would expect strong loan growth of 4-5%, and a 15% increase in net interest margin (NIM) to 2.65% driving down the expense ratio to 55%, and provisions that are 20% lower than our base case," wrote Morgan Stanley's Betsy Graseck.
Source: Morgan Stanley
BlackRock Inc.
Ticker: BLK
Primary Industry: Banking & Financial Services
Price Target: $400
2015 Price to Earnings: 16.5
Comment: "In the aforementioned scenario of a longer-than-expected economic upcycle, US Equity Strategist Adam Parker would expect a materially higher stock market, and we believe equities will likely outperform fixed income, which benefits BLK due to its Assets under Management (AuM) being skewed toward equities (53% of total, or $2.4 trillion of AuM)," wrote Morgan Stanley's Betsy Graseck. "Furthermore, we believe BLK has an outsized ability to grow its high-margin ETF business (iShares), which itself has ~80% of its AuM in equities."
Source: Morgan Stanley
Calpine Corp.
Ticker: CPN
Primary Industry: Utilities
Price Target: $30
2015 Price to Earnings: 26.2
Comment: "As shale gas drilling in the US continues its trend of decreasing drilling costs, and as this cheap shale gas is made increasingly available thanks to significant growth in gas transmission capacity, Calpine's gas-fired generation should become an increasingly competitive source of power generation," wrote Morgan Stanley's Stephen Byrd.
Source: Morgan Stanley
Canadian Pacific
Ticker: CP
Primary Industry: Railroads, Freight
Price Target: $285
2015 Price to Earnings: 20.6
Comment: "We believe CP can successfully leverage its low costs and high service into structural revenue growth driven by organic growth and market share gains, and if the macro upcycle is longer than expected, CP’s growth opportunities would be that much greater," wrote Morgan Stanley's William Greene.
Source: Morgan Stanley
Caterpillar
Ticker: CAT
Primary Industry: Capital Goods
Price Target: $103
2015 Price to Earnings: 14.7
Comment: "CAT has three operating segments, which have exposure to a variety of industrial end markets (construction, mining, Oil & Gas, transportation, power gen, etc.)," wrote Morgan Stanley's Nicole DeBlase. "As such, the company benefits from a diverse base of macroeconomic trends."
Source: Morgan Stanley
Cimarex Energy
Ticker: XEC
Primary Industry: Energy
Price Target: $180
2015 Price to Earnings: 24.4
Comment: "Stronger, longer-lasting growth would support ongoing improvements in oil and gas technology that boost capital productivity," wrote Morgan Stanley's Drew Venker. "We expect these improvements to continue benefiting Cimarex in the coming years, as they have in the past 12 months."
Source: Morgan Stanley
Citigroup
Ticker: C
Primary Industry: Banking & Financial Services
Price Target: $63
2015 Price to Earnings: 9.8
Comment: "In a longer-than-expected economic upcycle, we expect stronger global growth would drive up loan growth to 4%, NIM up 7% to 3.10%, drive down Citi’s expense ratio to 53%, and result in provisions 10% lower than our base case," said Morgan Stanley's Betsy Graseck.
Source: Morgan Stanley
Core Laboratories
Ticker: CLB
Primary Industry: Energy
Price Target: $185
2015 Price to Earnings: 22.1
Comment: "CLB should benefit from an extended cycle, as prolonged economic growth should tighten oil supply/demand balance, increasing demand for (1) lab services used to determine the best way to develop new fields and monitor existing fields, and (2) downhole diagnostic services used to maximize production," wrote Morgan Stanley's Ole Slorer.
Source: Morgan Stanley
Cummins
Ticker: CMI
Primary Industry: Capital Goods
Price Target: $152
2015 Price to Earnings: 13.9
Comment: "The company’s Components segment continues to profit from the secular trend of countries requiring stricter emission standards, while Engine grows on the back of increased demand in the North America market," wrote Morgan Stanley's Nicole DeBlase. "Its Power Generation segment likely would also benefit as global growth strengthens and becomes less volatile, especially in emerging markets."
Source: Morgan Stanley
Delta Air Lines
Ticker: DAL
Primary Industry: Airlines
Price Target: $55
2015 Price to Earnings: 10.3
Comment: "The industry is experiencing the most disciplined cyclical capacity rebound amid the most concentrated industry structure since industry deregulation," wrote Morgan Stanley's John Godyn. "Therefore, we forecast the best margins the industry has seen since deregulation. To play this thesis, we recommend super-major DAL, given its significant leverage to the cycle."
Source: Morgan Stanley
Duke Realty
Ticker: DRE
Primary Industry: Property
Price Target: $21
2015 Price to Earnings: 14.8
Comment: "Duke’s nationwide warehouse portfolio, the second largest in the US, represents a direct GDP play as essentially all consumer goods and most housing materials (for new builds and remodeling) pass through a warehouse," wrote Morgan Stanley's Vance Edelson. "The current cycle is benefiting from the unprecedented lack of new warehouse supply following the Great Recession, with Duke as one of the few players able to meet the demand with its own construction team."
Source: Morgan Stanley
EOG Resources
Ticker: EOG
Primary Industry: Energy
Price Target: $136
2015 Price to Earnings: 20.7
Comment: "In our view, EOG offers the best combination of de facto 100% US unconventional exposure, with: (1) top-tier large- cap debt adjusted production growth; (2) 15+ years of 100%+ IRR inventory in multiple basins (+30% ATROR at $80/Bl oil across its portfolio); (3) premier position in Eagle Ford core, the lowest-cost oil basin in US (+100% ATROR at $80/Bl oil); (4) proven and clear leadership in unconventional drilling and execution; (5) positive FCF (the only US E&Ps that is currently FCF positive)," wrote Morgan Stanley's Evan Calio.
Source: Morgan Stanley
Estee Lauder
Ticker: EL
Primary Industry: Household & Personal Care
Price Target: $83
2015 Price to Earnings: 25.4
Comment: "EL’s peer-leading growth profile should be enhanced by a prolonged economic expansion given its leverage to the more discretionary beauty category, and more specifically prestige beauty with greater leverage to the higher-growth/margin skin care segment, as well as faster-growing travel retail and eCommerce channels," wrote Morgan Stanley's Dara Mohsenian.
Source: Morgan Stanley
Ticker: FB
Primary Industry: Technology
Price Target: $90
2015 Price to Earnings: 38.8
Comment: "FB is an essentially 100% advertising-driven business that tends to move with the broader macro," wrote Morgan Stanley's Benjamin Swinburne. "Within advertising, it is well-positioned secularly. Also, search and mobile display are experiencing rapid growth globally."
Source: Morgan Stanley
FMC Technologies
Ticker: FTI
Primary Industry: Energy
Price Target: $68
2015 Price to Earnings: 17.2
Comment: "FTI should benefit from increasing role in offshore oil production required to meet growing demand," wrote Morgan Stanley's Ole Slorer. "We estimate that offshore is likely to represent nearly 60% of incremental oil supply through 2020."
Source: Morgan Stanley
Ticker: GOOG
Primary Industry: Media
Price Target: $600
2015 Price to Earnings: 19.5
Comment: "GOOGL is an essentially 100% advertising-driven business that tends to move with the broader macro, wrote Morgan Stanley's Ben Swinburne. "Within advertising, it is well-positioned secularly. Also, search and mobile display are experiencing rapid growth globally."
Source: Morgan Stanley
Halliburton
Ticker: HAL
Primary Industry: Energy
Price Target: $60
2015 Price to Earnings: 11.3
Comment: "We believe increased demand for oil and affiliated services could further exacerbate the current logistical bottleneck, where Halliburton has the most advantaged position," wrote Morgan Stanley's Ole Slorer. "Meanwhile, Halliburton's ability to outgrow peers in recent years may prove successful with limited impact on profitability in a prolonged economic cycle."
Source: Morgan Stanley
Hilton Worldwide
Ticker: HLT
Primary Industry: Leisure & Lodging
Price Target: $32
2015 Price to Earnings: 28.2
Comment: "A longer-than-expected cycle would supplement Hilton’s already strong unit growth (managed and franchised hotels growing at ~6%)," wrote Morgan Stanley's Thomas Allen. "In addition, HLT’s greater-than-peers ownership of its hotels means that it would continue to benefit from outsized operating leverage."
Source: Morgan Stanley
L Brands
Ticker: LB
Primary Industry: Apparel & Apparel Manufacturing
Price Target: $76
2015 Price to Earnings: 20.5
Comment: "LB should be a beneficiary of broad discretionary spending improvement given its wide geographic and demographic reach in addition to its being the #1 specialty retailer of intimate apparel, a category that generally tracks GDP growth," wrote Morgan Stanley's Kimberly Greenberger.
Source: Morgan Stanley
Linear Technology
Ticker: LLTC
Primary Industry: Tech/Semiconductors
Price Target: $46
2015 Price to Earnings: 20.7
Comment: "In a steady 3% GDP growth environment, we think LLTC can grow at 10% due to increasing electronic content and share gains," Morgan Stanley's Craig Hettenbach wrote. "Linear continues to skew its portfolio toward industrial and autos, which represent 43%/20% of total sales today, up from 33%/10% five years ago."
Source: Morgan Stanley
Macy's
Ticker: M
Primary Industry: Apparel & Apparel Manufacturing
Price Target: $66
2015 Price to Earnings: 12.6
Comment: "Macy’s is the best-positioned department store company and a secular winner in omni-channel retailing, in our opinion," wrote Morgan Stanley's Kimberly Greenberger. "Consistent execution, compelling long-term strategies, strong management, and a solid balance sheet should lead to continued market share gains and reliable earnings growth."
Source: Morgan Stanley
Magna International
Ticker: MGA
Primary Industry: Autos & Auto Parts
Price Target: $130
2015 Price to Earnings: 10.1
Comment: "MGA is possibly the best value and visibility story in North America Autos," wrote Morgan Stanley's Ravi Shanker. "A longer-than-expected upcycle can boost margins further and help ramp up Magna’s presence in Asia (primarily China) where they have made significant investments recently."
Source: Morgan Stanley
PACCAR
Ticker: PCAR
Primary Industry: Trucking
Price Target: $67
2015 Price to Earnings: 15.7
Comment: "PACCAR would benefit from continued strength in the US Economy as increased freight demand drives production growth and, likely, pricing (boosting incrementals)," wrote Morgan Stanley's Nicole DeBlase. "Internationally, ~35% of PACCAR’s truck shipments come from Europe, where the market is currently depressed and will likely recover as the economy returns to more consistent growth."
Source: Morgan Stanley
Phillips 66
Ticker: PSX
Primary Industry: Energy
Price Target: $93
2015 Price to Earnings: 8.8
Comment: "In our view, its unique assets and progressive strategy are allowing it to grow organically higher-valued midstream and chemical asset into a majority of cash flow in ~3 years (faster than expected)," wrote Morgan Stanley's Evan Calio.
Source: Morgan Stanley
Regions Financial
Ticker: RF
Primary Industry: Banking & Financial Services
Price Target: $12.50
2015 Price to Earnings: 11.3
Comment: "A longer-than-expected economic upcycle should result in stronger loan growth of 5-6% and a 12% NIM to 3.6%, driving Regions’ expense ratio down to 56%. In this scenario, provisions would be 20% lower than our base case and the gross buyback ratio 20ppt higher to 70%," wrote Morgan Stanley's Betsy Graseck.
Source: Morgan Stanley
Sabre Corp
Ticker: SABR
Primary Industry: IT Services
Price Target: $22
2015 Price to Earnings: 16.8
Comment: "Sabre stands to benefit from a longer economic cycle as it is reliant on global travel volume, which has grown at a multiple of GDP over time, as well as corporate travel, which tends to be more robust during periods of economic expansion," wrote Morgan Stanley's Brian Essex.
Source: Morgan Stanley
Schlumberger
Ticker: SLB
Primary Industry: Energy
Price Target: $135
2015 Price to Earnings: 16.1
Comment: "SLB is a technology powerhouse with the highest R&D budget and strongest margins among its large-cap service peers, in our opinion, and thus should be a prime beneficiary of the increased energy production that comes with economic expansion," wrote Morgan Stanley's Ore Slorer.
Source: Morgan Stanley
Sempra Energy
Ticker: SRE
Primary Industry: Utilities
Price Target: $128
2015 Price to Earnings: 23.2
Comment: "To the extent there is a longer-than-expected macro upcycle, the company has the potential to extend its double-digit annual earnings growth beyond decade’s end," wrote Morgan Stanley's Rajeev Lalwani. "This would be driven by several multi-billion projects including gas/liquids export, pipelines, and renewable generation."
Source: Morgan Stanley
Signature Bank
Ticker: SBNY
Primary Industry: Banking & Financial Services
Price Target: $140
2015 Price to Earnings: 18.4
Comment: "It is less asset-sensitive than most other midcap banks, but its valuation multiple is driven by its ability to outgrow peers (both in terms of loans and EPS), which would accelerate in a longer-than-expected macro upcycle," wrote Morgan Stanley's Ken Zerbe.
Source: Morgan Stanley
Synchrony Financial
Ticker: SYF
Primary Industry: Banking & Financial Services
Price Target: $30
2015 Price to Earnings: 11.9
Comment: "In an extended economic upcycle, we would expect near-prime consumer demand for credit to run above our 5% base case and credit losses to run below our 4-5% base case, fueled by stronger for longer job growth," wrote Morgan Stanley's Betsy Graseck.
Source: Morgan Stanley
T. Rowe Price
Ticker: TROW
Primary Industry: Banking & Financial Services
Price Target: $87
2015 Price to Earnings: 17.4
Comment: "In a longer-than-expected economic upcycle, Equity Strategist Adam Parker would expect a materially higher stock market, and we believe equity returns would outpace fixed income returns," wrote Morgan Stanley's Betsy Graseck. "TROW, with ~77% of its AuM skewed towards equities, would be a prime beneficiary if this were to occur."
Source: Morgan Stanley
Terex
Ticker: TEX
Primary Industry: Capital Goods
Price Target: $34
2015 Price to Earnings: 10.5
Comment: "Terex operates in five business segments; however, construction accounts for ~55% of revenues," wrote Morgan Stanley's Nicole DeBlase. "If the upcycle continues, Non-Residential construction would likely benefit disproportionately (given that we are further below prior peak than for other industries)."
Source: Morgan Stanley
Union Pacific
Ticker: UNP
Primary Industry: Railroads, Freight
Price Target: $139
2015 Price to Earnings: 17.7
Comment: "UNP is a core transport recommendation as the company has a most favorable exposure to each of the key themes underpinning our broader rail thesis, including: (1) operating leverage to solid volume growth, which has the potential to exceed GDP growth in years ahead; (2) inflation-plus pricing, with the likelihood for core pricing gains to materially accelerate in years ahead; and (3) productivity gains aimed to continue offsetting inflation," wrote Morgan Stanley's William Greene.
Source: Morgan Stanley
United Rentals
Ticker: URI
Primary Industry: Capital Goods
Price Target: $122
2015 Price to Earnings: 13.3
Comment: "URI is a pure play on North American non-residential construction," wrote Morgan Stanley's Nicole DeBlase. "As such, the company benefits from the same Non-Resi dynamic as Terex."
Source: Morgan Stanley
US Steel Corp.
Ticker: X
Primary Industry: Steel
Price Target: $60
2015 Price to Earnings: 6.7
Comment: "US Steel is typically a late-cycle performer as steel demand and margins tend to remain elevated in the later stages of a recovery, which gradually reset investor views on mid-cycle value," wrote Morgan Stanley's Evan Kurtz. "In addition, the management team is in the process of transforming the asset base to become more profitable through the cycle. The longer this current cycle lasts, the more latitude management would have to implement permanent margin-enhancing changes, which could ultimately fetch a higher multiple for the stock."
Source: Morgan Stanley
Waddell & Reed
Ticker: WDR
Primary Industry: Banking & Financial Services
Price Target: $53
2015 Price to Earnings: 12.9
Comment: "In a longer-than-expected economic upcycle, US Equity Strategist Adam Parker would expect a materially higher stock market, and we believe equities will outperform fixed income," wrote Morgan Stanley's Thomas Whitehead. "WDR has ~80% of its AuM skewed to equities, and would stand to benefit greatly should this extended economic cycle play out."
Source: Morgan Stanley
Walt Disney
Ticker: DIS
Primary Industry: Media
Price Target: $95
2015 Price to Earnings: 19.0
Comment: "Disney benefits from ad spending on ESPN and ABC, as well as broader consumer discretionary growth at its Theme Parks," wrote Morgan Stanley's Benjamin Swinburne. "It has recently invested significant capital into its Parks and so leveraging a long macro upswing should lead to particularly strong operating leverage at its Parks."
Source: Morgan Stanley
Whole Foods Mkt.
Ticker: WFM
Primary Industry: Food, Drug & Conv.
Price Target: $50
2015 Price to Earnings: 26.8
Comment: "A longer-than-expected expansion would increase disposable income in aggregate, providing a tailwind for the fast-growing natural/organic food segment, in turn leading to upside to our forecast 9% CAGR and $100 billion 2020 segment sales estimate," wrote Morgan Stanley's Vincent Sinisi. "Whole Foods is a differentiated specialty leader in this fast-growing area of food retail, with growth in early stages, in our view, and we see opportunities for long-term market share gains."
Source: Morgan Stanley
WisdomTree Inv.
Ticker: WETF
Primary Industry: Banking & Financial Services
Price Target: $17
2015 Price to Earnings: 35.5
Comment: "In a longer-than-expected economic upcycle, we believe equities will likely outperform fixed income, which benefits WETF given its ~95% AuM skew towards equities," wrote Morgan Stanley's Thomas Whitehead.
Source: Morgan Stanley
Zions Bancorp
Ticker: ZION
Primary Industry: Banking & Financial Services
Price Target: $35
2015 Price to Earnings: 16.5
Comment: "ZION would benefit from a longer-than-expected macro upcycle, given its primary focus on small business lending and asset sensitivity," wrote Morgan Stanley's Ken Zerbe. "A better macro environment would drive an improvement in small business borrowing, which comes at higher net interest margins than larger loans, and would drive better loan growth than currently built in."
Source: Morgan Stanley