Morgan Stanley-US Equity Strategy What Are Companies Saying-108418583.pdf

WhatAreCompaniesSaying?MorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestmentdecision.Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.MORGANSTANLEYRESEARCHMORGANSTANLEY&CO.LLCNicholasJ.Lentini,CFAEquityStrategistNick.Lentini@morganstanley.com+1212761-5863MichaelWilsonChiefUSEquityStrategist&CIOofMorganStanleyWealthManagementandInstitutionalSecuritiesM.Wilson@morganstanley.com+1212761-2532AndrewPaukerEquityStrategistAndrew.Pauker@morganstanley.com+1212761-1330MichelleM.Weaver,CFAEquityStrategistMichelle.M.Weaver@morganstanley.com+1212296-5254DianeDing,Ph.D.QuantitativeStrategistQian.Ding@morganstanley.com+1212761-6758KeyTakeawaysandChartstoWatchTranscriptMentions:TimeSeriesChartsTranscriptMentions:IndustryBreakdownCorporateSurveys:TimeSeriesChartsCompanyQuotesPg.13Pg.25Pg.36Pg.44Pg.3ANew,RecurringPublicationfromUSEquityStrategyFocusedonKeyTopicsofDiscussionfromUSCompaniesMay28,202404:01AMGMTMORGANSTANLEYRESEARCH2WhatAreCompaniesSaying?KeyTakeawaysandChartstoWatchTranscriptMentions:TimeSeriesChartsTranscriptMentions:IndustryBreakdownCorporateSurveys:TimeSeriesChartsCompanyQuotesPg.13Pg.25Pg.36Pg.44Pg.3MORGANSTANLEYRESEARCH3KeyTakeawaysMarginsArtificialIntelligenceConsumerHealthFreeCashFlow•Companiesareoptimisticfora2HreboundinmarginswhichwilldriveoperatingleveragedowntoEPS.•Corporatementionsofcostpressuresremainelevateddespitefallinginflation.ManycompaniesciteeasierCOGSyear-over-yearcomparisonsinthesecondhalf.•Wagesremainakeyheadwindformargins.•AItranscriptmentionsarenearall-timehighsandmentionedinthevastmajorityoftranscriptsacrossallsectors.•CompaniesprimarilyciteAIasanefficiencygainratherthanarevenuedriver.•AIandAIdatasecurityisatoppriorityforcorporatemanagementteams.•CompanieswithoutobviousAIusecasesoftenreferenceaddingAItointernaldatamodelstohelpimprovedecision-makingorclientanalytics.•Corporatementionsofconsumerhealthremainmixed.•Mentionsof“choiceful”consumershasdroppedincalendar2Qvs1Q.•Bellweatherconsumercompaniesreporteddifferingpicturesofconsumerhealth–somecitingcontinuedstrength,somecitingnotangiblechangebuthopeforimprovement,andotherscitingweaknessonthemarginandvalue-seekingbehavior.•Highvslowincomeconsumerhealthremainsapopulardebate.•MentionsofFreeCashFlowhaveincreasedtoall-timehighs.•Companiesarefocusingonwheretobestspendelevatedcashlevels.•BuybacksareacommonlydiscusseduseofcashbutmentionsofM&A,Capex,Dividends,andR&Dremainfrequentandelevated.WhatAreCompaniesSaying?OurTake•Weexpectmodestmarginexpansionin2024and2025marginaspositiveoperatingleverageresumesalongsidehealthy,mid-singledigittop-linegrowth.SeeUSEquitiesMid-YearOutlook:AWiderRangeofOutcomesandOpportunities(20May2024)•WeexpectAIdiffusiontoleadtobroaderefficiencyandproductivitygainsacrossthe