5 Stocks With Moat Rating Changes This Month

Economic moat ratings, which reflect a company’s durable competitive advantages, are at the heart of Morningstar’s stock-picking methodology. Companies with competitive advantages that are seen as lasting at least 20 years are assigned wide moats. Those seen as able to fend off competition for 10–20 years receive narrow moats. Companies that analysts do not believe possess significant competitive advantages are not assigned moats. When combined with low valuations, stocks with moats have historically had a greater chance of outperforming over the long term.

With moats’ multidecade focus, these ratings are not often reassigned. But changes within a company or its competitive landscape can lead Morningstar’s equity analysts to adjust ratings. According to Allen Good, who heads Morningstar’s moat rating committee, “We take a long-term perspective when assigning moat ratings, so they are unlikely to change frequently. News events may create volatility in share prices, but that does not mean a company’s competitive position has changed meaningfully. However, analysts are continually testing their assumptions and evaluating a company’s advantages. When an analyst determines something fundamental has changed to impact a company’s longer-term outlook, a moat rating change may be necessary.”

Once a month, we screen US-listed stocks covered by Morningstar analysts for any changes in moat ratings. Since Aug. 11, of the 885 stocks on the list, five companies saw changes in their moat ratings. One stock was upgraded and four stocks were downgraded.

Economic Moat Ratings Across Morningstar’s US Coverage

Following this month’s changes, of the 885 US-listed stocks covered by Morningstar, 216 have wide moats, 368 have narrow moats, and 301 have no moat. On a percentage basis, 34% of the stocks have no moat, 42% have narrow moats, and 24% have wide moats.

How Economic Moat Ratings Work

Morningstar Economic Moat Rating is a key element in evaluating a company’s long-term competitive advantage and its ability to generate excess returns on capital over many years. Morningstar equity analysts determine a company’s economic moat by examining how well it can maintain or grow its market position. A moat helps protect a company’s profits from rivals. Some businesses are better equipped to preserve these advantages over time, while others operate in more competitive or vulnerable industries.

A company with a strong and enduring competitive advantage can often command better pricing, retain loyal customers, and operate more efficiently. These qualities support long-term value creation, which is especially important when evaluating a stock’s potential for superior long-term returns.

Morningstar identifies five primary sources that contribute to a company’s economic moat:

• Switching Costs: Barriers that discourage customers from changing providers due to time, expense, or inconvenience.
• Network Effects: The increasing value of a product or service as more people use it, reinforcing its dominance.
• Intangible Assets: Patents, regulatory licenses, and brand recognition that give a company a distinct edge.
• Cost Advantage: The ability to deliver goods or services at a lower cost than competitors, leading to greater margins or price competitiveness.
• Efficient Scale: Operating in markets with limited competition due to natural or structural constraints.

Here’s a closer look at the stocks with moat rating changes this month, along with our analysts’ commentary.

XPO XPO

• Morningstar Rating
  : ★★
• Sector
  : Industrials
• Industry
  : Trucking

Although economic moats exist in less-than-truckload shipping, we historically considered XPO a no-moat company, partly because it’s tough to differentiate. Network service quality (on-time performance, damage claims), reach, and superior internal processes that optimize line-haul and pickup and delivery efficiency are replicable by well-capitalized competitors over time. Also, for many carriers, pure scale economies (from size alone) have historically proved insufficient to generate economic profit over the full cycle. Additionally, ignoring XPO’s various transportation and logistics divisions (before they were divested), we considered its LTL operations to be a “show me” story in terms of long-term margin and return on invested capital potential over the full freight cycle.

XPO now has an extended record of raising its LTL margin profile, including through the anemic freight backdrop of the past three years. Moreover, visibility into its core LTL segment’s ROIC performance improved following the 2022 RXO divestiture. We think XPO is best characterized as having a narrow moat rooted in robust route density, which drives material cost advantages relative to the several hundred providers operating across the LTL landscape. Because LTL carriers consolidate freight from multiple shippers through a relay system of break-bulk terminals, higher volume (tonnage) flowing through a network yields greater terminal and truck utilization, and thus leverage over fixed costs. Aided by a decade of impressive efficiency gains, XPO belongs to a unique class of carriers, alongside Old Dominion, that have forged a freight density advantage durable enough to mitigate the price-competitive nature of LTL shipping and support meaningful long-term economic profit, in our view.

How did XPO build a moat in such a highly competitive business? XPO’s LTL division has ranked among the top three carriers by market share for decades (including under Con-way’s ownership), but scale alone isn’t sufficient to carve out a competitive edge. XPO spent the past decade aggressively optimizing the former Con-way operations (acquired in 2016), with investment in network quality and efficiency accelerating in 2022 as XPO completed its final divestiture and became a pure-play carrier. A key initiative has been insourcing line-haul miles (long-haul shipments between consolidation terminals). This isn’t easy to accomplish, but a greater share of line-haul miles moved with in-house equipment and drivers boosts margins through materially lower costs (especially during periods of tight industry capacity) and significantly greater control over on-time performance. XPO has also targeted dock and pickup-and-delivery optimization, among other efforts, to improve labor efficiency, supported by heavy IT infrastructure investment.

BCE BCE

• Morningstar Rating
  : ★★★★
• Sector
  : Communication Services
• Industry
  : Telecom Services

We assign BCE a no-moat rating despite seeing elements of efficient scale and cost advantages. These advantages help protect BCE’s position against smaller telecom competitors, but they have not translated into a sufficiently durable spread between returns on invested capital and the company’s cost of capital in recent years.

Telecom businesses generated approximately 87% of BCE’s segment revenue and 93% of segment adjusted EBITDA in 2025, making its performance overwhelmingly responsible for the company’s consolidated economics. BCE has been unable to retain sufficient economic value due to intense competition, regulation, technological substitution, and the substantial capital required to maintain and expand its networks. While we expect returns to improve once Quebecor is no longer mandated to price its wireless services aggressively in 2033, any unforeseen increase in competition would be enough to hold returns back below BCE’s cost of capital.

Dow DOW

• Morningstar Rating
  : ★★★
• Sector
  : Basic Materials
• Industry
  : Chemicals

We assign Dow a no-moat rating. We think Dow fails to clear the hurdle for a cost advantage moat, owing to long-run industry oversupply. Moats in chemical production are assigned to commodity processors that have an advantage in procuring low-cost raw materials, using them to produce higher-value materials such as plastic resins, which can be sold to downstream manufacturers. The value that Dow creates and captures is the price spread between these inputs and its products multiplied by the volume it can produce and sell. We believe the chemical industry is in a structural glut and will remain well-supplied over the long term.

Chemicals and plastics are traditionally made from crude oil derivatives (naphtha), natural gas liquids (ethane and propane), or coal. As most chemicals are commodities, feedstock cost is a major determinant of moats and profitability throughout a cycle, accounting for around 60%-70% of the total cost of goods sold, depending on the feedstock used. Ethane represents the largest share of NGL production and is used almost exclusively to produce ethylene. In ethylene production, the US and Middle East production are the two lowest-cost regional producers, owing to low-cost natural gas feedstock. Conversely, Europe and Asia commonly use crude oil-based naphtha as feedstock.

Rogers Communications RCI

• Morningstar Rating
  : ★★★★
• Sector
  : Communication Services
• Industry
  : Telecom Services

We assign Rogers a no-moat rating, despite aspects of efficient scale and cost advantage in the firm’s telecom business and intangible assets in the firm’s media segment stemming from its ownership of the Toronto Blue Jays and Maple Leaf Sports & Entertainment, or MLSE. When stripping out the effect of media assets assumed when acquiring portions of MLSE, returns on capital have exceeded Rogers’ cost of capital in all but two years, 2024 and 2025, but not meaningfully, and returns have been on a general downtrend.

Rogers’ wireless and wireline offerings benefit from two common telecom moat sources: efficient scale and cost advantage. Canada’s telecom landscape has historically been home to three large national-scale competitors: Rogers, BCE, and Telus, along with a larger group of regional players. In 2023, Rogers acquired Shaw to consolidate the broadband market but agreed to spin off Shaw’s wireless business to Quebecor, a regional player based in Quebec, to secure regulatory approval. To increase customer choice and keep pricing down, the Canadian government has effectively propped up Quebecor as a national wireless operator, guaranteeing access to the larger carriers’ networks. We think it is possible for all wireless players to achieve reasonable profitability but think it is unlikely without greater impetus for rational competition and given Canadian regulators’ preference for cheaper and more widely available telecom services.

Telus TU

• Morningstar Rating
  : ★★★★
• Sector
  : Communication Services
• Industry
  : Telecom Services

We assign Telus a no-moat rating despite recognizing elements of efficient scale and cost advantages within the company’s telecom business. Telus’ national wireless operations and regional fixed-line network benefit from barriers to entry, fixed-cost leverage, and infrastructure that would be difficult for a new competitor to replicate economically. However, these advantages are largely shared with BCE and Rogers and have not been sufficient to allow Telus to consistently earn consolidated returns materially above its cost of capital. By our measure, Telus hasn’t earned an ROIC above its cost of capital since 2018, and results have materially deteriorated since then.

Canada’s telecom market has historically supported only three to four national-scale wireless operators and several regional fixed-network owners. For a new wireless competitor to be successful, it would need to acquire spectrum, construct a national radio network, develop backhaul and IT infrastructure, and attract customers from established operators while initially spreading these costs across a small subscriber base. Similarly, a new broadband provider would need to invest heavily in rights-of-way, fiber, construction, network equipment, and customer connections before developing sufficient density to earn an acceptable return. Given the already low returns earned by incumbents and a highly mature telecom market, these economics provide Telus with aspects of an efficient-scale advantage.

Read More on Moat Ratings and Morningstar’s Stock Investing Methodology

• Read Morningstar’s Guide to Stock Investing to inform your stock-picking process.
• Use the Morningstar Investor screener to build a shortlist of financial-services stocks to research and watch.
• Find more info on the economic moat rating here.
• Here’s how to measure a company’s economic advantage.
• Read our list of wide-moat stocks.
• Learn about stocks with moats that Morningstar analysts think are cheap.
• The best of both worlds: undervalued wide-moat stocks.