Thematic Alpha: Conviction into Earnings

Thematic Alpha | North America

As we enter the height of the 3Q reporting season, we highlight 14 names that Morgan Stanley’s analysts expect to move meaningfully on the earnings release: 12 we expect to rise, and 2 where we see a potential decline.

Key Takeaways

• We look for share-price upside on the print from AHR, ARGX, CHD, FFIV, F, GLBE, GRND, GH, ORLY, WULF, WDC, WMB.
• We see downside risk for ARE and HCA.

3Q26 earnings estimates have been revised higher into this reporting season. They are up 1.8% over the past three months, against a historical tendency to fall ahead of reporting (2Q26 was +3.8%).

We believe this higher bar creates tougher expectations for T+1 price reactions. Indeed, early reads on this have been soft – with ~10% of S&P 500 companies having reported, the median T+1 reaction is -0.4% (-0.6% relative) and only 41% of reactions are positive.

Longer-term revisions breadth has cooled but remains positive. S&P 500 earnings revisions breadth (ERB) for FY2 is +11% heading into the season, down from the late-June peak of +28%. The two weeks into the start of earnings season are seasonally weak for ERB before it historically moves higher once reporting starts. Earnings growth expectations now call for +33% in 2026 and +16% in 2027. Consensus sales growth is 11% for 2026 and 8% for 2027.

Against that backdrop, we highlight 14 names for which Morgan Stanley Research analysts expect a near-term catalyst that should drive a meaningful move in each stock.

Additional Contributors

Morgan Stanley & Co. LLC

• Stephen C Byrd, Equity Analyst (Powered Shell Providers), +1 212 761-3865, Stephen.Byrd@morganstanley.com
• James E Faucette, Equity Analyst (Payments & Processing), +1 212 296-5771, James.Faucette@morganstanley.com
• Nathan Feather, Equity Analyst (Internet), +1 212 761-9812, Nathan.Feather@morganstanley.com
• Simeon Gutman, CFA, Equity Analyst (Hardline/Broadline/Food Retail), +1 212 761-3920, Simeon.Gutman@morganstanley.com
• Craig Hettenbach, Equity Analyst (Healthcare Facilities), +1 212 761-6435, Craig.Hettenbach@morganstanley.com
• Robert S Kad, Equity Analyst (Midstream Energy Infrastructure), +1 212 761-0065, Robert.Kad@morganstanley.com
• Ronald Kamdem, Equity Analyst (Real Estate Investment Trusts), (212) 296 8319, Ronald.Kamdem@morganstanley.com
• Sean Laaman, Ph.D., Equity Analyst (Biotechnology), +1 212 761-4947, Sean.Laaman@morganstanley.com
• Meta A Marshall, Equity Analyst (Telecom & Networking Equipment), +1 212 761-0430, Meta.Marshall@morganstanley.com
• Dara Mohsenian, CFA, Equity Analyst (Household & Personal Care Products), +1 212 761-6575, Dara.Mohsenian@morganstanley.com
• Andrew S Percoco, Equity Analyst (Autos & Shared Mobility), +1 212 296-4322, Andrew.Percoco@morganstanley.com
• Kallum L Titchmarsh, Equity Analyst (Life Science Tools & Diagnostics), +1 212 761-2351, Kallum.Titchmarsh@morganstanley.com
• Erik W Woodring, Equity Analyst (IT Hardware), +1 212 296-8083, Erik.Woodring@morganstanley.com

Conviction Into Earnings – Summary

Conviction Into Earnings – Financial Summary

Exhibit 1: Key Financial Data

Source: Morgan Stanley Research, ModelWare as of 10/16/2026. Metrics are calculated using the ’for consensus’ methodology. NA = Not Applicable; NM = Not Meaningful. For AHR.N and ARE.N, numbers in the EPS column represent FFO per share and numbers in the P/E column represent P/FFO per share.

American Healthcare REIT (AHR) – Ron Kamdem

Near-Term View: Positive

We see a favorable setup for AHR into 3Q26 earnings, driven by continued upside from SHOP/ISHC operating leverage and accelerating external growth. We expect 3Q26 FFO of $0.57 (+29.5% YoY), ahead of Cons/MSe of $0.55, and see potential for management to raise ’26e FFO guidance by $0.02 to $2.19, above Cons/MSe of $2.17. We model total portfolio cash SS-NOI growth of 6.1%. Beyond 3Q, we see three additional drivers: 1) early operating performance from the Kensington and LCB portfolios, 2) conversion and replenishment of the ~$675mn awarded investment pipeline, and 3) timing of forward-equity settlements relative to acquisition closings (AHR stated that its >$675 million awarded investment pipeline was expected to close using match-funded proceeds from unsettled forward agreements). Improving visibility into 2027 per-share accretion from recent investments should support a positive near-term stock reaction.

Overweight Investment Thesis

We remain OW AHR as we view the business primarily as an SNF operating in a RIDEA structure, complemented by an attractive SHOP portfolio and leased segments that provide stable, defensive growth. We see a demographic tailwind across the portfolio. Limited new supply in ISHC and SHOP supports continued occupancy recovery and pricing gains, which should drive margin expansion. This should translate into above-peer organic growth. External growth has become a larger part of the investment thesis, with AHR reporting more than $2bn of YTD investments and an awarded pipeline of ~$675mn, while dividend coverage and leverage have improved since the IPO. AHR offers strong earnings growth at a lower valuation than premium RIDEA peers. Our $55 PT applies a 22.5x multiple to our ’27e FFO of $2.45. Our PT implies stage-two growth of ~15% in our DCF, assuming a 7% cost of equity and ~2% terminal growth.

Potential Catalysts

• 3Q26 earnings release on November 5 AMC and conference call on November 6: We expect a beat and raise, driven by SHOP/ISHC operating performance and accretive investment activity.
• Remaining Kensington closings and pipeline conversion: The two remaining Kensington communities are expected to close in 4Q26. Conversion and replenishment of the ~$675mn awarded investment pipeline could provide better visibility into 2027 external growth.

argenx (ARGX) – Sean Laaman

Near-Term View: Positive

We see a favorable near-term setup following the recent pullback. While the Phase 3 Sjögren’s discontinuation removed a meaningful pipeline opportunity, we believe the stock reaction overstates the impact on the broader franchise. The core VYVGART business continues to deliver strong growth, with significant runway remaining in MG and particularly CIDP, while the recent positive myositis readout adds another potentially multibillion-dollar indication. With expectations reset, we believe solid 3Q commercial execution followed by the upcoming Phase 3 empasiprubart MMN readout can refocus investors on the durability and breadth of the growth story.

Overweight Investment Thesis

We remain OW ARGX as we see an underappreciated earnings-compounding story driven by continued VYVGART penetration, indication expansion and improving operating leverage, with additional upside as the pipeline matures. Our longer-term thesis increasingly rests on ARGX evolving from a highly successful single-franchise company into a multi-asset immunology platform: empasiprubart represents the most important near-term opportunity to establish a second commercial growth engine, while FB102 in celiac adds further diversification. We estimate roughly $13bn of risk-adjusted revenue in 2030 and ~$23bn by 2036, leaving substantial long-duration growth if ARGX can translate its pipeline into additional franchises.

Potential Catalysts

• 3Q26 earnings – October 22, 2026: Strong VYVGART execution remains the key focus.
• Empasiprubart Phase 3 MMN data – 4Q26: Key catalyst to establish ARGX’s second growth engine.
• VYVGART myositis progression – 2027: Regulatory progress could unlock another multibillion-dollar indication.

Church & Dwight (CHD) – Dara Mohsenian

Near-Term View: Positive

We like Church and Dwight heading into Q3 EPS. The market has focused on a sequential slowdown in US scanner data trends in Q3, with sales (ex divestitures) +3.4% in all-channel data vs 5.6% in H1, reflecting HPC sector pressure points, including a weak low-end US consumer, competitive promotion, and a lack of price increases. However, CHD growth is still above most HPC peers, and with strong 6% International and solid 3% Specialty growth expected, and our 3.5% Consumer Domestic forecast reflective of scanner data, we see CHD as on track to deliver ~4% OSG in Q3, above the 3.2% consensus. This should be good enough to drive the stock up, as long as CHD delivers on GMs, which have been another worry point in the market with commodity cost pressure. We also see GM worry as overblown with favorable brand mix (TheraBreath and personal care) helping CHD offset cost pressure.

Equal-weight Investment Thesis

We rate CHD Equal-weight, We view the company as posting sustainably robust 3-4% OSG, driven by brand momentum, particularly at TheraBreath, but with a difficult US household products sector environment (limited volume growth with a weak US consumer, muted pricing power given competitive dynamics, and higher commodity costs pos the Iran conflict), we see EPS growth as muted in 2027, which should limit the stock long-term with valuation already at 24x CY27 EPS.

Potential Catalysts

• 3Q26 earnings (October 30)
• Periodic US scanner data

F5 Inc (FFIV) – Meta Marshall

Near-Term View: Positive

We are tactically positive on FFIV into F4Q26 results, with encouraging channel checks and a reasonable consensus bar supporting an attractive setup. We expect FFIV to guide to 8-10% y/y constant-currency revenue growth to start FY27, while maintaining its upper-single-digit FY27 revenue growth framework. We also see potential for gross margin upside, as anticipated memory cost pressure is already embedded in management’s FY27 non-GAAP gross margin target of 80-82%, while relative stability in memory pricing could provide incremental support. Sell-side estimates appear well positioned at ~7% y/y revenue growth in both FY27 and FY28, leaving a manageable bar heading into earnings. Although absolute valuation is approaching historical peaks, we continue to see scope for a flight-to-quality trade into the print.

Equal-weight Investment Thesis

Channel checks suggest a healthy demand environment, with one VAR highlighting limited competition in multi-cloud traffic management and another reporting ~9% y/y growth in its FFIV reseller business, above its historical 1-2% growth rate. Relative valuation remains reasonable in our view at ~2x PEG versus ~4x for cybersecurity peers, although elevated absolute valuation leaves a more balanced risk/reward. Capital returns remain a key part of the investment case, with management targeting repurchases of at least 50% of annual free cash flow after returning ~63% of cumulative FCF through buybacks from FY20-FY25.

Potential Catalysts

• F4Q26 earnings (10/27)
• Stable memory pricing
• Sustained multi-cloud, AI and security demand
• Continued share repurchases and capital returns

Ford (F) – Andrew Percoco

Near-Term View: Positive

We believe Ford has a positive catalyst setup heading into 3Q26 earnings, with the key upside opportunity coming from a potential update on Ford Energy’s Energy Storage (ESS) backlog and customer contracting activity. We expect management to provide greater visibility into its ESS backlog, which we believe could be a significant catalyst for the stock as investors begin to appreciate the potential for earnings diversification beyond the core automotive business. While we remain constructive on Ford’s near-term auto earnings, with resilient US truck demand providing support, higher commodity costs and the recent supplier outage create some uncertainty around the quarter and full-year guidance. Our 3Q adj. EBIT estimate of $2.33bn is ~2% below consensus, suggesting limited upside from the earnings print itself. However, we believe tangible evidence of customer demand and backlog growth within Ford Energy could outweigh near-term automotive headwinds and drive a positive stock reaction.

Equal-weight Investment Thesis

We view Ford Energy as an underappreciated opportunity for earnings diversification and a potential driver of improved Model e profitability. Ford’s relationship with CATL is a key differentiator, providing access to best-in-class LFP technology while leveraging domestic manufacturing to address increasingly stringent sourcing requirements. We believe this creates a compelling value proposition for utility-scale and data center customers seeking proven, domestically manufactured ESS solutions that can qualify for federal tax incentives. The demand backdrop is equally attractive: our Utilities and Clean Tech team forecasts US ESS deployments growing at a 38% CAGR through 2030 to ~279 GWh, driven by accelerating data center power demand, grid constraints, and renewable penetration. Against this backdrop, we see potential upside to Ford’s initial 20 GWh capacity target as customer contracting activity accelerates. Importantly, while we already incorporate an earnings contribution from Ford Energy in our Model e forecasts, we see additional upside to estimates and valuation as Ford builds a firm backlog and de-risks its growth outlook. We remain EW-rated given ongoing automotive execution challenges, but believe greater visibility into Ford Energy’s commercial traction could be an important catalyst for the market to begin assigning more meaningful value to this business.

Potential Catalysts

• 3Q26 earnings (10/28): Ford Energy backlog update, including potential customer wins with large commercial customers and hyperscalers.
• ESS commercialization: Visibility into contracted volumes relative to the initial 20 GWh capacity target, production readiness, and potential capacity expansion.
• Core auto outlook: FY26 guidance update, including supplier disruptions, F-Series production recovery, and commodity cost headwinds.

Global-e Online (GLBE) – James Faucette

Near-Term View - Positive

We believe GLBE has a positive setup heading into 3Q26 results and expect the company to outperform consensus GMV expectations. Our 3Q GMV forecast calls for 37.6% y/y growth vs. consensus of 34.1%, as the implied sequential decline looks overly conservative relative to historical seasonality and GLBE’s track record of consistent GMV beats. Same-store-sales growth continues to run in the mid-teens, ~500-600bps above historical levels, supporting sustained 30%+ GMV growth even as FX tailwinds moderate and Canadian comps toughen. We recently raised estimates across the board, largely driven by SSS tailwinds that drive higher NDR assumptions, with our 2027/2028 GMV estimates now 6%/8% above consensus and GAAP EPS 16%/11% above. We also see potential for fuel surcharge recapture to support fulfillment margins, particularly in 4Q26.

Overweight Investment Thesis

We view GLBE as a leading enabler of cross-border e-commerce with a long runway for growth as merchants increasingly leverage its localized payments, fulfillment, and merchant-of-record capabilities. We are bullish on GLBE given the durability of mid-teens same-store-sales growth (which we believe could see an incremental tailwind from agentic commerce), continued enterprise merchant traction, potential agentic commerce tailwinds, and structural margin upside from Shopify Managed Markets. Importantly, we believe investor concerns around take rate compression are overstated, as our analysis suggests that when excluding the impact of Ted Baker, like-for-like service fee take rates declined only ~11bps in both 2024 and 2025, with the remaining pressure largely explainable by a growing mix of larger enterprise merchants. We also believe Managed Markets could generate incremental EBITDA margins in the mid-to-high 30s as it scales, potentially driving consolidated margins above the company’s 25% medium-term target. Overall, we see GLBE delivering ~37% GAAP EPS CAGR from 2026-2028, while trading at only ~16x our ’28 GAAP EPS. For further detail on our investment thesis, please refer to Global-e Online Ltd.: Upgrade to Overweight; Secular Cross-Border Growth / Agentic, Take Rate Comfort & Managed Markets Incremental Margins Leave Us More Bullish (19 Oct 2026).

Potential Catalysts

• 3Q26 earnings and stronger-than-expected GMV growth
• Greater take rate transparency and sustained same-store-sales growth
• Shopify Managed Markets adoption and incremental margin expansion

Grindr (GRND) – Nathan Feather

Near-Term View: Positive

We are positive GRND into upcoming 3Q26 earnings for 3 key reasons: 1) High likelihood of a beat & raise. GRND put out heavily conservative guidance implying 2H revenue growth of ~12% y/y vs. ~35% in 1H. Although they are lapping a price increase, that implies effectively no sequential growth which seems highly unlikely. Alternative data supports a beat with Sensor Tower showing MAU growth accelerating to 7% y/y (vs. cons at -1% y/y) and +4% q/q revenue growth (vs. cons. at -2% q/q). 2) Clarity on Freddie. GRND recently acquired PrEP telehealth provider Freddie (for our takes, see here). The stock reacted negatively on the news, but we see this deal as a material opportunity potentially able to drive a ~50% uplift to current revenue/EBITDA. While bears are concerned on near-term dilution, we expect positive color on the FY27 impact to financials to calm fears. 3) Compelling valuation. In our view, sentiment has turned overly negative since the Freddie acquisition with the stock down -12% and the FY2 EBITDA multiple de-rating by ~1.5 turns. As a result, GRND is now trading at 10.5x EBITDA for an 18% ’25-’28 CAGR which we see as a compelling entry point with an asymmetric 3:1 bull-bear skew.

Overweight Investment Thesis

We view GRND as a one-of-one asset with powerful network effects (15M MAUs), high engagement (~70 mins/DAU), and strong profitability (>40% EBITDA margins). We believe GRND is under-monetized relative to peers & the value it delivers. In our view, new products set to launch soon (such as its ultra-premium tier EDGE) in addition to expanding services beyond core dating (e.g. healthcare) could drive durable 20%+ long-term revenue growth without hurting the free user experience. Risk reward also screens attractive with GRND trading at a material discount to peers on a growth-adjusted basis and its historic multiple.

Potential Catalysts

• 3Q26 Earnings (late October/early November)
• EDGE launch (early November)

Guardant Health (GH) – Kallum Titchmarsh

Near-Term View: Positive

We expect strong Q3 results for GH and think there is potential for the stock to see a positive re-rating in the near term. We model Q3 revenue of $353mn (+33% y/y) vs. the Street’s $350mn, driven by an acceleration in Shield adoption and strength across the broader oncology portfolio. We think the UNH coverage decision announced in July (effective 8/1/2026) will be a tangible Screening tailwind to Q3 Shield volumes and could represent upside risk to an already impressive trajectory YTD. In Oncology, we model Q3 revenue of $228mn (vs. Street $227mn) driven by another strong quarter for G360. On Reveal, our channel checks have indicated healthy interest uptick and anticipation of the Ultra launch. Finally on valuation, while GH continues to trade near its all-time average EV/Sales multiple of ~14x, since Q2 the stock has de-rated by about 30% relative to the Dx comp group, presenting a favorable relative entry point and upside from re-rating closer to peer multiples if it can deliver strong a strong quarter.

Overweight Investment Thesis

GH is extremely well positioned in the attractive liquid biopsy vertical, with a broad oncology portfolio across screening, CGP, and MRD and multiple catalysts for the stock over the near term. Shield adoption has been strong to date with recent coverage decisions from UNH, Carelon, and EviCore expanding covered lives to ~94mn and supporting the sustainability of the Shield ramp over the medium term. We see building evidence of clinical utility and adoption of G360 driving additional payor coverage, with the TissueNext test further enhancing the therapy selection value proposition. LT, we see GH transitioning into a platform play (w/ both tissue and liquid biopsy testing), with growth driven by pipeline products for recurrence/response monitoring and early detection across multiple tumor types, which unlock significantly larger TAMs vs. therapy selection alone.

Potential Catalysts

• 3Q26 Earnings (11/5): We expect a beat and raise, driven by an acceleration in Shield adoption and strength across the broader oncology portfolio

O’Reilly Automotive (ORLY) – Simeon Gutman

Near-Term View: Positive

We are constructive on ORLY heading into Q3 earnings, with our conviction supported by three factors: 1) ORLY should continue to benefit from market share gains, supported by its industry-leading distribution network and ability to capture commercial demand; 2) we expect early signs of improving incremental margins (from ~19.5% in Q2 toward the ~22–23% range we model in 2H26) as SG&A growth moderates, supporting better earnings flow-through and a stronger EPS trajectory into FY27; and 3) we believe ORLY has among the strongest pricing power across Hardlines/Broadlines, leaving it particularly well positioned to manage inflationary cost pressures heading into next year. We believe Q3 results could reinforce confidence in the durability of share gains and improving earnings trajectory, supporting upward estimate revisions and driving the stock.

Overweight Investment Thesis

We view ORLY as a best-in-class earnings compounder, with distribution-led share gains supporting sustained above-industry growth. Its differentiated supply chain, leading parts availability and service expertise underpin competitive advantages across DIY and DIFM. These strengths should support MSD% comps and expanding Pro penetration. In the near term, improving incremental margins should support ~HSD% EBIT growth and, alongside share repurchases, low-double-digit EPS growth. Moderating SG&A growth and private-label sourcing benefits should strengthen earnings conversion, providing scope for estimate upside and multiple re-rating following the recent valuation reset.

Potential Catalysts

• Q3 2026 earnings announcement (Wednesday, October 28 after market close)

TeraWulf (WULF) – Stephen Byrd

Near-Term View: Positive

We believe investors fundamentally misprice WULF, under-appreciating the value of their high-quality HPC leases. These leases, signed with high-quality tenants and/or counterparties, generate (in our view), nearly double the per-share value of where the stock currently trades. Adding additional upside to the name are: 1) strong visibility into adding additional grid access and inking deals on those sites, 2) an expansive power pipeline of attractive sites with grid access and strong customer interest (including a 1GW site in Kentucky), 3) lower cost of construction on existing sites, contributing to stronger yields on capex, 4) strong liquidity and cash balance, and 5) insulation from the current rates market in that some project interest costs will be borne (if material) by the tenants should costs rise to certain levels.

Overweight Investment Thesis

WULF is a strong play for those looking for exposure to the strong economics of solving the power shortfall in serving AI demand (a hurdle recently confirmed by NVIDIA management). Relative to other peers, they have stronger management, experience in building large-scale power projects, a strong track record in signing lucrative deals (with above-average yields), a history of receiving strong credit support, upcoming grid access enablement, and near-term, rapidly-ramping, high-quality cash flows. WULF stock is essentially flat YTD, which does not make sense to us given the multiple positive developments in 2026, including: 1) signing the 401 MW Hawesville lease, 2) securing close to 2,000 MW of incremental power access, 3) energizing 102 MW of data center capacity, with another 168 MW energizing in 4Q 2026, and 4) remaining on time and within their originally established budget for all projects.

Potential Catalysts

• Upcoming deal expected in Q1 or Q2 for the entire 1GW Hawesville Site
• Issuance of $3.5bn of debt
• Energization and stabilization of existing lease MWs

Western Digital (WDC) – Erik Woodring

Near-Term View: Positive

We see a favorable setup for WDC heading into F1Q27 earnings for three reasons. First, we believe expectations have reset too far relative to fundamentals following WDC’s recent underperformance. Investor concerns have centered on WDC’s relative execution on enterprise capacity shipments and perceived lag vs. STX on HAMR, but our checks point to accelerating HDD demand, continued pricing strength and improving high-capacity drive mix. Second, we see meaningful upside to forward estimates. For the September quarter, we expect WDC results solidly above management’s guidance, while our December quarter EPS estimate is ~10% above consensus, supported by stronger pricing and gross margin assumptions. Our FY27/FY28 EPS estimates remain 15-40% above consensus, with further upside possible if pricing and enterprise capacity shipments outperform our base case. Third, valuation creates an attractive setup into the print. Following the recent correction, WDC trades below 8x our FY28 EPS estimate, below the historical trough multiple of ~8x for HDD stocks. With expectations lower than for STX, we believe a beat and stronger-than-expected December quarter outlook could drive both upward estimate revisions and a narrowing of WDC’s valuation discount to STX.

Overweight Investment Thesis

We view WDC as an undervalued way to gain exposure to a strengthening HDD cycle, supported by accelerating cloud demand, improving pricing and a mix shift toward higher-capacity enterprise drives. HDD demand continues to outstrip supply, while longer contract structures mean stronger pricing should flow through earnings over multiple quarters rather than all at once. Importantly, we believe the market is underestimating both the duration and through-cycle profitability of this cycle. Our base-case FY28 EPS estimate is ~40% above consensus, yet our work suggests another ~40% upside in a bull case if stronger pricing and enterprise capacity shipments persist. Longer term, we believe WDC can maintain its competitive position despite being behind STX on HAMR, supported by continued areal-density gains from ePMR and a transition to HAMR over time. Against this earnings trajectory, we view the recent valuation reset as an attractive entry point.

Potential Catalysts

• F1Q27 earnings (October 22): September quarter results and December quarter guidance, particularly pricing, gross margin and enterprise capacity shipments.
• STX earnings (October 27): Read-through on HDD demand, pricing and industry supply discipline.
• Hyperscaler earnings: Updates on cloud capex and storage demand.

Williams Companies (WMB) – Robert Kad

Near-Term View: Positive

We see an attractive setup for WMB heading into 3Q26 results, with the next wave of behind-the-meter (BTM) power project announcements potentially driving positive EBITDA estimate revisions and further multiple expansion. WMB now guides to 11%+ EBITDA CAGR from 2025 to 2030, but we believe the market continues to underestimate the scale and sustainability of its AI infrastructure growth opportunity. We forecast ~16% EBITDA CAGR through 2030, above consensus, with particularly strong growth in 2028–29 as new power projects enter service. We expect additional data center power project announcements over the next few months (4Q26–1Q27), potentially including larger, multi-GW hyperscaler projects, to drive upward revisions to growth capex and EBITDA expectations.

Overweight Investment Thesis

We view WMB as one of the most compelling risk-adjusted ways to participate in the AI infrastructure buildout, supported by its extensive natural gas pipeline network, long-term contracted cash flows, and growing BTM power business. WMB offers turnkey power solutions to hyperscalers, integrating natural gas supply, pipeline connectivity, and onsite generation, with the ability to deliver power within 18–24 months of contract execution. We believe this speed-to-market advantage, combined with long-duration contracts and attractive project economics (~20% ROEs), positions WMB to capture a meaningful share of growing data center power demand.

Potential Catalysts

• 3Q26 earnings (11/2)
• New data center power project announcements over the next few months (4Q26–1Q27), potentially including multi-GW hyperscaler projects
• Upward revisions to 2027+ growth capex and EBITDA expectations
• Additional Transco expansion opportunities

Alexandria Real Estate Equities (ARE) – Ron Kamdem

Near-Term View: Negative

We see an unfavorable setup for ARE into 3Q26 earnings, as early signs of improvement in industry absorption have yet to translate into visibility on an earnings trough. Elevated vacancy and weak cash leasing spreads remain headwinds to estimates, as does dilution from asset sales. We expect 3Q26 FFO of $1.51 (-31.8% YoY), below Cons of $1.53 and in line with MSe. Our estimates assume total portfolio cash SS-NOI growth of -10.0% and ~$1.45bn of dispositions at a 6.1% cap rate. Industry fundamentals remain mixed: TTM leasing activity declined 4.7% YoY, while net absorption turned positive at 2.3mn sq ft and supply continued to decline. Vacancy, however, remains elevated at 25.9%. We expect management to reiterate ’26e FFO guidance of $6.40 at the midpoint. The bigger debate, in our view, is the recurring 4Q FFO exit rate, previously indicated at the low end of $1.40–$1.50, and the sustainability of 2027 earnings. With ~$100.5mn of annual rent tied to 2027 expirations and expected downtime of 12–24 months, we continue to see downside risk, led by leasing progress, with capital-sourcing execution and disposition pricing as further variables. We remain cautious on the print given limited visibility into an earnings trough and several potential sources of negative estimate revisions.

Underweight Investment Thesis

We remain UW ARE as we see less attractive risk/reward following the rally in life science REITs. While the stock has re-rated on early signs of improving fundamentals, we think visibility into an earnings trough remains limited, with valuation no longer providing sufficient compensation for the downside risks. Lab fundamentals remain challenged despite improving demand indicators, as occupancy, cash leasing spreads, and SS-NOI continue to face pressure, with a recovery in pricing power likely still several years away. We see two key overhangs on estimates: 1) elevated 2027 lease expirations and associated downtime, and 2) capital recycling, with asset sales and lower capitalized interest potentially extending FFO pressure. We apply a ~10x multiple to our ’27e FFO of $5.26 to arrive at our $53 PT, compared with the 2-/5-year historical averages of ~10x/~15x. Our valuation reflects a turnaround strategy at an early stage, including $2.9bn of dispositions and a 45% dividend reduction in 2026. Our $53 PT implies stage-two growth of 0% and terminal growth of ~2% in our DCF, assuming a ~7% cost of equity.

Potential Catalysts

• 3Q26 earnings release on October 26 AMC and conference call on October 27: We expect investor focus on SS-NOI, the recurring 4Q FFO exit rate, cash leasing spreads, and management’s outlook for the 2027 earnings trough.
• Investor Day on December 2: Management expects to introduce 2027 guidance and key underlying assumptions, including 2027 sources and uses of capital. We expect the focus to be on the earnings trough and the impact of ~$100.5mn of annual rent associated with 2027 expirations and expected downtime of 12–24 months. Construction-spending and capitalized-interest assumptions, along with disposition requirements and leverage, will also be in focus.

HCA Healthcare (HCA) – Craig Hettenbach

Near-Term View: Negative

We see a poor risk/reward skew for Q3 earnings. Given lingering weakness in surgery volumes (decline of 2%-3% y/y in Q2) and exchange marketplace headwinds, there’s a low probability that HCA will raise guidance for core EBITDA. With the stock rallying ~30% from the July lows compared to a 2% gain in the S&P 500, driven in part by a bid to more defensive parts of the market like healthcare and positive sentiment around the Midterms, a clean/in-line print could be sold. On the other hand, any additional setbacks in the business, after already missing core EBITDA margin in Q1 and Q2, could send the stock sharply lower. For additional context, HCA is trading at forward EV/EBITDA multiple of ~9.7x, or 0.5x turns above its historic median and well above the trough of 8x in July, despite disappointing margins and a rise in uninsured/self-pay. Our EBITDA estimates are 2% ahead of the Street for Q3 and 1% below for Q4.

Underweight Investment Thesis

Following a 5-year period of meaningful tailwinds to HCA’s business, marked by a rebound in elective procedures post Covid, a doubling in exchange market members to 24mn and significant expansion in Medicaid supplement payments funding, these drivers are beginning to reverse. This is putting pressure on core EBITDA margins (2026E guidance is 20.1%, down 50 bps y/y despite a 50 bps tailwind from Medicaid Supplemental payments), with risks not captured in the stock’s premium valuation relative to history.

Potential Catalysts

• HCA Q3 earnings on October 27
• Peer earnings - UHS on October 27, THC on October 29
• Read through from payor earnings - ELV on October 21 and MOH October 22
• Midterm elections on November 3

Disclaimers

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Risk Reward Reference links

1. View explanation of Options Probabilities methodology (https://www.morganstanley.com/content/dam/msdotcom/en/assets/pdfs/Options_Probabilities_Exhibit_Link.pdf)
2. View explanation of Risk Rewards Themes (https://www.morganstanley.com/content/dam/msdotcom/en/assets/pdfs/RR_Themes_Exhibit_Link.pdf)
3. View explanation of regional hierarchies (https://www.morganstanley.com/content/dam/msdotcom/en/assets/pdfs/GEG_Exhibit_Link.pdf)
4. View explanation of Theme/Exposure methodology (https://www.morganstanley.com/content/dam/msdotcom/en/assets/pdfs/ESG_Sustainable_Solutions_External_Link.pdf)
5. View explanation of HERS methodology (https://www.morganstanley.com/content/dam/msdotcom/en/assets/pdfs/ESG_HERS_External_Link.pdf)