Morgan Stanley Continues To Prefer DIY Auto, Home Improvement Segments in Hardline Group

Morgan Stanley issued their Hardline/Broadline Outlook for 2016 and highlighted several companies including Lowe's Companies, Inc. (NYSE: LOW), Advance Auto Parts, Inc. (NYSE: AAP), O'Reilly Automotive Inc (NASDAQ: ORLY), AutoZone, Inc. (NYSE: AZO) and Home Depot Inc (NYSE: HD).

Analysts Simeon Gutman and Joshua Siber wrote, "We continue to prefer the DIY Auto and Home Improvement segments given our forecasts for healthy top-line growth and margins. Our top idea is LOW given favorable secular tailwinds and 20 percent achievable WPS growth. We also like AAP, OW-rated ORLY, and risk/reward is favorable for EW rated AZO and HD."

The analysts highlighted a few of their top picks:

Lowe's: $84 price target

Analysts see the potential for growth due to strong product offerings in combination with efficient cost structures.

Advance Auto Parts: $195 price target

Morgan Stanley sees a recent management change as a positive catalyst for the company going forward along with the opportunity to drive top-line growth. However, in the near term, Morgan Stanley considers the company to be "dead money."

O'Reilly Automotive: $300 price target

Morgan Stanley sees near-term secular growth and gains in market share driven by high quality of services and strong management.