The recent pullback in the U.S. market presents an opportunity to acquire growth stocks at more attractive prices. Stable U.S. business activity signals strong growth and resilience, creating a favorable environment for high-growth investments. Additionally, positive sentiment in sectors like defense and healthcare may lead to promising future opportunities.
Therefore, it may be wise for investors to consider investing in strong stocks that Wall Street loves for 2024, such as RTX Corporation (RTX), The Cigna Group (CI), and General Dynamics Corporation (GD), all of which have strong growth potential.
Inflation has eased to 2.5% year-over-year, the lowest since February 2021. As it stabilizes, companies could see improved profitability, making certain stocks more appealing. Additionally, the Federal Reserve’s gradual rate cuts over the next 25 months are expected to create a favorable environment for stock market growth by reducing borrowing costs and boosting corporate investment.
Historically, gradual Fed rate cuts have fueled stock market rallies, creating opportunities for capital gains as monetary policy eases and inflation stabilizes. Amid this, growth stocks stand out for their above-average revenue growth, with companies frequently reinvesting profits to drive future expansion, making them a compelling choice for long-term investors.
Considering these conducive trends, let’s analyze the fundamentals of the three growth picks mentioned above.
RTX Corporation (RTX)
RTX is an aerospace and defense company that provides systems and services for commercial, military, and government customers internationally. It operates through three segments: Collins Aerospace, Pratt & Whitney, and Raytheon.
RTX’s levered FCF grew at a CAGR of 13.1% over the past three years. Also, its EBITDA grew at a CAGR of 3.6% over the past three years.
In terms of the trailing-12-month levered FCF margin, RTX’s 12.99% is 101.7% higher than the 6.44% industry average. Likewise, its 3.28% trailing-12-month Capex / Sales is 12.4% higher than the 2.92% industry average.
RTX’s sales for the second quarter ending June 30, 2024, increased 7.7% from the year to $19.72 billion. Its adjusted net income attributable to common shareholders remained flat year-over-year at $1.90 billion, while its EPS rose 9.3% year-over-year to $1.41. Additionally, the company’s free cash flow increased significantly from the previous year to $2.20 billion.
Street expects RTX’s EPS and revenue for the quarter ending September 30, 2024, to increase 7.3% and 47.3% year-over-year to $1.34 and $19.83 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. The stock has gained 68.6% over the past year to close the last trading session at $121.47.
RTX’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #21 out of 71 stocks in the Air/Defense Services industry. It has a B grade for Growth, Momentum, and Sentiment. Click here to see RTX’s ratings for Value, Stability, and Quality.
The Cigna Group (CI)
CI provides insurance and related services. It operates through its Evernorth Health Services and Cigna Healthcare segments. The company also offers permanent insurance contracts for financing employer-paid benefits.
CI’s revenue grew at a CAGR of 9% over the past five years. Also, its total assets grew at a CAGR of 0.3% over the past three years.
In terms of the trailing-12-month EBIT margin, CI’s 3.51% is 22.5% higher than the 2.87% industry average. Similarly, its 1.41x asset turnover ratio is 243.1% higher than the 0.41x industry average.
During the second quarter ended June 30, 2024, CI’s adjusted revenues increased 24.4% year-over-year to $60.47 billion. Its adjusted income from operations rose 4.9% and 9.6% year-over-year to $1.91 billion, or $6.72 per share. Moreover, the company’s pharmacy revenues came in at $45.10 billion, up 32.8% over the prior-year quarter.
Analysts expect CI’s revenue for the quarter ending September 30, 2024, to increase 21.5% year-over-year to $59.59 billion. Its EPS for the same quarter is expected to grow 8.1% year-over-year to $7.32. It surpassed the EPS estimates in each of the trailing four quarters. Over the past nine months, CI’s stock has gained 15.9% to close the last trading session at $345.62.
It’s no surprise that CI has an overall rating of A, which translates to a Strong Buy in our proprietary POWR Ratings system.
It has a B grade for Growth, Value, Stability, and Quality. It is ranked #2 out of 10 stocks in the A-rated Medical - Health Insurance industry. Beyond what we stated above, we also have given CI grades for Momentum and Sentiment. Get all the CI’s ratings here.
General Dynamics Corporation (GD)
GD operates as a global aerospace and defense company through four segments: Aerospace, Marine Systems, Combat Systems, and Technologies.
On September 19, 2024, GDIT announced a $299 million contract from the Defense Information Systems Agency (DISA) to support and enhance the Pentagon’s network infrastructure. The contract includes a one-year base period with two six-month options.
On September 13, 2024, GD’s NASSCO announced a contract to build up to eight additional John Lewis-class fleet replenishment oilers for the U.S. Navy, starting with a $780 million award for the tenth ship. If all eight ships are built, the contract’s total value could exceed $6.70 billion.
GD’s EPS grew at a CAGR of 3.7% over the past three years. Likewise, its net income grew at a CAGR of 2.6% during the same period.
In terms of the trailing-12-month net income margin, GD’s 7.89% is 26.9% higher than the 6.22% industry average. Its 6.39% trailing-12-month Return on Total Assets is 29.5% higher than the 4.94% industry average. Likewise, its 0.83x trailing-12-month asset turnover ratio is 6.6% higher than the industry average of 0.78x.
GD’s revenue for the second quarter which ended on June 30, 2024, increased 18% year-over-year to $11.98 billion. Its operating earnings rose 20.2% from the year-ago quarter to $1.16 billion. Moreover, the company’s net earnings amounted to $905 million and $3.26 per share, up 21.6% and 20.7% over the previous year’s quarter, respectively.
For the quarter ending September 30, 2024, GD’s EPS and revenue are expected to increase by 22.6% and 15.1% year-over-year to $3.73 and $12.17 billion, respectively. It has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters. Over the past year, the stock has gained 37.5% to close the last trading session at $301.56.
GD’s POWR Ratings reflect a robust outlook. It has an overall rating of B, which translates to a Buy in our proprietary system.
It is ranked #5 in the Air/Defense Services industry. It has a B grade for Growth, Momentum, Stability, and Sentiment. Click here to access additional grades of GD for Value and Quality.
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RTX shares were trading at $121.16 per share on Thursday afternoon, up $0.26 (+0.22%). Year-to-date, RTX has gained 46.60%, versus a 21.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
3 Growth Stocks Wall Street Loves for 2024 StockNews.com
