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Investing.com -- Morgan Stanley analysts identified key industries with robust earnings revisions, pricing power, and minimal policy risks as top picks for investors in the current market environment.
In a research note, the firm highlighted Financials, Media & Entertainment, and Software (ETR:SOWGn) as standout sectors for earnings per share (EPS) revisions.
These service-oriented industries are said to be less exposed to tariff uncertainties, bolstering their appeal.
Morgan Stanley (NYSE:MS) notes, “High-quality relative earnings revisions are surging, pointing to upside for performance.” Additionally, companies within these sectors that have lower sensitivity to the dollar may see even stronger earnings amid ongoing USD strength.
In the consumer space, Morgan Stanley recommends focusing on services over goods.
The analysts state that "pricing power continues to be much stronger for services businesses," with inflation for services excluding shelter running at 4% year-over-year, compared to a -2% decline in durable goods inflation.
Consumer Goods equities are said to remain under pressure due to tariff-related valuation overhangs, which persist amid ongoing trade policy uncertainty.
A broad positive demand outlook is also emerging across sectors, according to the bank. The analysts explain that in Gaming and Lodging, U.S. revenue per available room (RevPAR) growth accelerated in Q4, while Airlines continue to benefit from strong demand and pricing power.
Additionally, the bank says Media companies are successfully implementing streaming price hikes, and enterprise hardware spending in Tech Hardware is seeing a modest uptick, driven by AI investments in Networking Equipment and Communication Software.
“Commentary from our analysts was incrementally more positive on the demand backdrop for this year,” wrote Morgan Stanley. Investors are encouraged to watch these resilient sectors closely for opportunities as the year progresses.