MORGAN STANLEY: Watch out! These 3 stocks are about to get terrible news

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Flickr / Ardinnnn ­čÖé

Welcome back to earnings season!

As we’ve noted, it seems that this quarter is going to be rough one, based on projections of earnings declines it almost seems like every company will be posting difficult quarterly results based on estimates. However, there may be some companies with worse news than others.

At least according to Morgan Stanley analysts who have identified 3 stocks that may take a serious beating come earnings announcements.

“Our analysts believe that one or more imminent events will drive the share price materially over the next 15-60 days,” said the note from Morgan Stanley’s equity analysts.

“For each of these stocks, our analyst has high conviction in a view that diverges from the Street’s, and expects a near-term event to drive the stock as the market’s view moves closer to ours.”

2 of the 3 are wireless providers, while the third is an industrial giant that is getting killed by secular trends.

We’ve compiled the 3 bad news firms, along with Morgan Stanley’s bull, bear, and base case for the stock price, and insight from the analyst covering the stock.

Check them out below.


Sprint

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A person walks by a Sprint store in Pasadena
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Thomson Reuters

Ticker: S

Sector: Wireless Telecommunications

Current Price: $3.37

Bull/Base/Bear Projection: $7/$3/$1

Morgan Stanley analyst Simon Flanney’s argument: “We expect Sprint’s recent record of improving postpaid phone adds and churn to come under pressure this quarter, for three reasons: 1) Management recently referenced an expected blip (upwards) in churn reflecting tablet contract expirations and a focus on higher quality customers. 2) ARPU may be pressured by ongoing promotional and competitive factors. 3) Channel checks suggest T-Mobile taking prepaid market share at Sprint’s expense, as Sprint has pulled back on marketing. We expect continued progress on cost cutting, but leverage and liquidity concerns will likely continue to be an overhang for investors, though the recently announced $2.2b network lease Co provides near term relief.”


Union Pacific

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Union Pacific CEO Lance Fritz
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CNBC/Youtube

Ticker: UNP

Sector: Ground Freight and Transportation

Current Price: $80.67

Bull/Base/Bear Projection: $100/$73/$63

Morgan Stanley analyst Ravi Shanker’s argument: “UNP’s traffic declines have accelerated towards the end of the quarter and we are concerned about the negative mix implications of the unprecedented 35%+ Y/Y decline in coal. While UNP has made significant progress on right-sizing resources (having furloughed 4,100 employees and stored 100 1,500 locomotives by early March), we think cost reductions may fall short of offsetting top-line / mix headwinds. We also see potential for core pricing to decelerate to 2.5%, which we believe is below expectations of 3%, and as such could weigh on stock sentiment.”


US Cellular

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Reuters/Regis Duvignau

Ticker: USM

Sector: Wireless Telecommunications

Current Price: $43.41

Bull/Base/Bear Projection: $57/$35/$22

Morgan Stanley analyst Simon Flanney’s argument: “We believe that 1Q16 was a very competitive quarter in the wireless industry, with all of the major carriers stepping up their competitive offers and promotional activity. We believe this may have pressured subscriber trends and ARPUs at US Cellular this quarter.”


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Flickr/Andy Morales

SEE ALSO: Standby for terrible news from Wall Street┬╗