Morgan Stanley downgrades Australia's Wesfarmers to 'underweight'

** Analysts at Morgan Stanley downgrade Australian conglomerate Wesfarmers WES to "Underweight" from "Equal-weight"

** Says downgrade due to limited avenues for earnings upgrades, peak multiples, and cautious stance on domestic consumer

** With global and domestic peers de-rating since March highs, we see elevated risk of underperformance given WES's lofty valuation - MS

** Brokerage says expansion of co's budget department store chain Kmart seems compelling but margins look to have peaked near term

** Adds defensive nature of hardware chain Bunnings' revenue could be overshadowed by flat margins given lagged impact of wage hikes and market weakness

** Says ongoing supermarket inquiries also pose growing spillover risk to Bunnings

** MS trims FY24-26 EPS estimates by average 1.8%, but increases PT to A$56.20 from A$55.30 after revising valuation multiples

** As of last close, WES up 16.3% YTD