Amazon, Apple, Eli Lilly: Here's Morgan Stanley's earnings playbook

Morgan Stanley analysts are setting a bullish tone for the upcoming earnings season, with specific companies expected to outperform. According to the analysts, investors should watch Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Eli Lilly (NYSE:LLY) closely, as these companies are anticipated to deliver strong results.

Amazon is highlighted with a "Positive" near-term view. Morgan Stanley expects Amazon to deliver a significant EBIT beat in Q2 and guide positively for Q3.

"We are 17% above Street EBIT" for Q2 and 10% above for Q3, the analysts noted, driven by North America Retail profitability and accelerating growth in Amazon Web Services (AWS).

Apple also holds a "Positive" near-term outlook. For the first time in over a year, Morgan Stanley sees a favorable setup, expecting Apple to post better-than-expected results.

"Street estimates are 4-5% too low for the September quarter," the analysts stated. They forecast Apple will achieve $96.9 billion in revenue for the September quarter, which is 4% above the consensus. Driving this optimism are strong iPhone builds, improvements in the Mac outlook, and robust growth in Services.

Eli Lilly is another key player with a positive outlook. Morgan Stanley anticipates that upcoming data from the Phase 3 SUMMIT trial of Tirzepatide/Zepbound in patients with obesity and heart failure will be a catalyst for the stock. The data, expected in Q3, could demonstrate significant benefits beyond weight loss, potentially broadening Medicare coverage and strengthening Tirzepatide's competitive profile.

The analysts noted, "We would expect positive data from SUMMIT (a statistically significant benefit on CV outcomes) to move LLY shares up ~2-3%."

Overall, Morgan Stanley's analysts are keen to see how companies manage margins in a challenging pricing environment and whether high expectations for the second half of 2024 will hold.

They also highlighted that earnings revisions for the S&P 500 have been less negative than average heading into the reporting season, suggesting cautious optimism for the broader market.