By Senad Karaahmetovic
Morgan Stanley analysts have moved the Top Pick designation from Eaton (NYSE:ETN) to Emerson Electric (NYSE:EMR).
The analysts see EMR as "one of the few idiosyncratic stories in Multis." They also see one of the most attractive risk/rewards skews in Morgan Stanley's research coverage.
"We see strong idiosyncratic risk/reward for EMR in a sector where fundamentals continue to decouple from macro indicators. We believe EMR shares have multiple ways to win with the key cyclical and strategic risks looking less probable," they said in a client note.
On the National Instruments (NASDAQ:NATI) front, the analysts argue that Emerson will either get it at an attractive price or walk away.
"The initial underperformance in shares at the announcement, amplified by a noisy F1Q23, now sets up favorable risk/reward. Our initial impression that management may overpay for a business with limited fundamental overlaps has been replaced by a better view on discipline and more constructive view on synergy potential. We believe EMR could be willing to go higher than its $53 bid but expect management would still walk away before $60," they added.
The analysts have an Overweight rating and a $96 per share price target on EMR stock.