A extremely anticipated company earnings season has simply kicked off, and Morgan Stanley has highlighted which shares to purchase — or keep away from. Goldman Sachs and Johnson & Johnson posted better-than-expected earnings Tuesday, including to Monday’s beats from Financial institution of New York Mellon and Financial institution of America . These stronger-than-forecast numbers come as expectations for third-quarter outcomes have tumbled. Morgan Stanley’s Michelle Weaver famous that total expectations for S & P 500 earnings are down 8% from their April peak. Excluding vitality, expectations are down 11%. “This earnings season specifically holds significance because it may form the talk between the bulls and the bears,” Weaver wrote. “A pointy discount in earnings estimates may sign important earnings cuts and a possible earnings recession.” “Alternatively, extra resilient 3Q numbers and steady steering may counsel a extra average earnings correction or a minimum of push the earnings debate till January’s fourth quarter reporting season,” she mentioned. Given this backdrop, Morgan Stanley analysts appeared for shares that might expertise huge swings based mostly on near-term catalysts, some constructive and others unfavourable. Listed below are a few of these names. Morgan Stanley sees upside for Arcutis Biotherapeutics if the biotech firm’s two phase-two research for its drug Zoryve are profitable. The medication is already used for psoriasis and is now being evaluated to be used in atopic dermatitis. Outcomes are anticipated by year-end. “We’d count on important investor deal with these information units, and our statistical evaluation suggests a excessive probability-of-success (POS) for each trials,” wrote Morgan Stanley analyst Vikram Purohit. Third-quarter earnings are in focus for Cummins . Morgan Stanley analyst Dillon Cumming anticipates that accelerating value/price tailwinds and provide chain normalization, in addition to a supportive Class 8 construct and order commentary, will catalyze an earnings beat within the third quarter. Than, in flip, ought to translate to greater earnings-per-share estimates for 2023, he mentioned. One other title that ought to see a constructive flip is Patterson-UTI Vitality , in accordance with analyst Connor Lynagh. He expects in-line third-quarter outcomes and fourth-quarter steering. Nevertheless, he sees greater 2023 EBITA and free-cash move revision potential for the corporate versus its friends. Lynagh additionally expects commentary round drilling and fracking market pricing and exercise developments that can be extra upbeat than expectations. “Moreover, we may see scope for early indications of PTEN’s 2023 capital allocation framework, together with potential for incremental shareholder returns, which might be obtained favorably by the market, in our view,” he wrote. In the meantime, Logitech is among the shares Morgan Stanley expects to say no as a result of unfavourable earnings. The corporate guided down for fiscal 12 months 2023 income progress final 12 months, however analyst Erik Woodring would not suppose the corporate did not keep in mind the continued deterioration of client PC demand within the final 90 days. “We imagine Dec Q/FY23 estimates should be revised down additional, and now mannequin Dec Q income 8% under consensus,” he wrote. Woodring additionally anticipates fiscal-year income progress will decline 10% 12 months over 12 months. One other title that might get hit is semiconductor firm Micron Expertise , due to buyers underestimating the severity of the present reminiscence declines. Analyst Joe Moore expects buyer and competitor stories to indicate exceptionally excessive inventories. — CNBC’s Michael Bloom contributing reporting.