Eaton (ETN) is expected to continue leading industry peers due to its high single-digit organic growth and US reshoring plans, Morgan Stanley said Tuesday in a research note.

Morgan Stanley said Eaton's Q1 results increased its confidence that the company can sustain single-digit organic growth by the end of this decade. The company reported Q1 adjusted earnings Friday of $2.72 per diluted share, up from $2.40 a year earlier. Revenue for the quarter was $6.38 billion, up from $5.94 billion a year earlier.

The bank said it disagrees with the market's skepticism that the broader US Industrial stocks will reduce the growth gap against Eaton over the next 12 months, noting that the company's data center segment recorded about 50% quarter-over-quarter growth in Q1 and the negotiation pipeline was up 18% on a quarterly basis. It also noted that large-scale data centers' capex is also moving higher yet again.

"Perhaps most importantly, our [$10 trillion] US Reshoring thesis is materializing quicker than expected and ETN stands as top beneficiary," the bank said. The expected US reshoring would drive electricity demand over the next decade, which will be a cycle extender for the company in a market worried about peak power demand, Morgan Stanley said.

Morgan Stanley also said that most of the company's revenue comes from manufacturing capex instead of data centers segment, and "the opportunity [to take benefit from increasing manufacturing capex] is just getting started."

Morgan Stanley maintains an overweight rating on the company, with a $375 price target.

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