Some companies should still be able to grow earnings even if the U.S. economy falls into a recession, according to Morgan Stanley. Mike Wilson, the firm’s chief equity strategist, said in a note to clients Tuesday that the market has not priced in a recession and that analyst estimates for corporate earnings will need to be revised lower in the coming months. However, Morgan Stanley analysts also picked stocks in their coverage where the earnings estimates on Wall Street seem likely to be raised. “Given the macro turmoil of the past few weeks, we wanted to provide a screen of stocks where earnings are relatively insulated from this risk and have the potential to see upward revisions… We polled Morgan Stanley analysts to see where they had high conviction that earnings will be revised upward going into 2023,” Wilson wrote. Source: Morgan Stanley Some of the stocks on the list have already outperformed significantly this year. Shares of Marathon Petroleum , for example, have gained more than 40% this year. The energy company is primarily involved in refining and the midstream transportation parts of the energy sector, which are seeing high demand as the U.S. and Europe have sanctioned Russia for its invasion of Ukraine. Many strategists and analysts expect oil refining, in particular, to remain a strong business due to the high cost and long timeline needed to build new facilities. Coca-Cola is another stock that has held up well, squeezing out a small gain for the year even as Wall Street dropped into a bear market. The stock is still well liked on Wall Street, with a buy rating from 70% of analysts. Coca-Cola also sports a dividend yield of 2.9%. One stock on the list with an upcoming catalyst that could lead to higher earnings is Liberty Media Formula One . The U.S. television deal for the racing series, which has gained popularity in recent years thanks in part to a Netflix documentary series, expires at the end of 2022 , and F1 is expected to have multiple bidders for its next deal. One traditionally defensive name on the list is drugmaker Eli Lilly . The stock has already gained more than 10% year to date, and Eli Lilly pays a dividend yield of 1.3%. — CNBC’s Michael Bloom contributed to this report.
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