Great stock ideas can be found in all segments of the market. The three companies below are very different, but they are all great growth stocks for their own reasons. Here you can read why you contract a logistics service provider GXO Logistics (NYSE: GXO), Delta Airlines (NYSE: DAL)and a heating, ventilation and air conditioning (HVAC) company. Carrier worldwide (NYSE: CARR) They’re all great stocks to buy for growth investors.
GXO Logistics
GXO Logistics operates in the e-commerce sector, which should see continued growth in the long term. GXO provides warehousing, distribution, logistics and supply chain solutions to a diverse customer base, with no single customer accounting for more than 4% of revenue.
The long-term growth drivers are the increasing willingness of blue chip customers to outsource their logistics operations to GXO, freeing up time and resources to focus on their core business.
In particular, GXO’s services provide significant benefits to its customers. For example, it can reduce variable storage costs by 50%, increase inventory turnover and reduce overall costs. These improvements translate into higher revenues and more efficient use of working capital for the customer.
Furthermore, GXO’s competitive advantage will only grow as it continues to integrate cutting-edge technology into the warehouses it designs and operates for customers. This includes machine vision for quality control and monitoring, automation and robotics for improving workflow, product ID scanners and advanced analytics for logistics warehouse management.
These technologies require expertise and experience to implement, and as technological advancements improve their productivity, it will make more sense for blue chip customers to use GXO and other contract logistics providers.
Delta Airlines
Delta Air Lines should experience revenue growth in line with the economy as a whole. However, that is not the reason to buy the shares. The real reason comes down to Delta’s growing focus on the premium traveler, where it expects revenue to grow faster than the economy. This includes ‘loyalty and other’ revenues, which it expects to grow significantly faster than the economy.
Delta sees further potential in its SkyMiles loyalty program and its co-branded Delta SkyMiles American Express Cards. The latter is becoming an increasingly important part of the stock’s investment strategy, as Delta expects American Express payments to grow from $6.8 billion in 2023 to $10 billion over the long term.
The two revenue drivers – premium travelers and American Express payments – are symbiotic. Attracting higher-income travelers to Delta Air Lines leads them to obtain Delta American Express cards, resulting in more spending on the cards.
Delta plans to quickly expand its free cash flow (FCF) from $2 billion to $3 billion to $4 billion by 2023, allowing it to reduce debt.
At the lower end of that FCF range, the stock would remain trading at less than 11 times FCF in 2024. Delta remains an excellent value stock for investors comfortable with a continued recovery in the travel industry, combined with an increasing focus on the premium traveler.
Carrier’s best days are yet to come
Carrier Global was spun off from the former United Technologies in 2020 and since then management has refocused the company on the key growth markets of ‘intelligent climate and energy solutions’. As part of this move, in 2020 management sold its remaining shares in commercial and industrial refrigeration company Beijer Ref for approximately $300 million.
The sale of the Chubb fire and security business for $3.1 billion followed in 2021, and the sale of its security business, Global Access Solutions, to Honeywell $4.95 billion followed this year. In addition, Carrier has entered into an agreement to sell its commercial refrigeration and industrial fire businesses and has initiated a sale process for its commercial and residential fire businesses.
In addition to the divestitures, Carrier has made a $12 billion strategic acquisition of European heat pump and photovoltaics company Viessmann Climate Solutions. The deal aims to shift Carrier’s focus to energy transition technologies, with Viessmann solutions fitting naturally with Carrier’s core heating, ventilation and air conditioning (HVAC) business.
The portfolio restructuring created a global company focused on climate technologies and energy transition solutions, positioning it for long-term growth. It’s an attractive company favored by regulatory changes, and Carrier’s valuation (it trades at 19 times estimated 2025 FCF) makes it a stock to consider buying for long-term investors.
Should You Invest $1,000 in Delta Air Lines Now?
Consider the following before purchasing shares in Delta Air Lines:
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American Express is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha holds positions at Honeywell International. The Motley Fool recommends Delta Air Lines and GXO Logistics. The Motley Fool has a disclosure policy.
Bull Market Buys: 3 Outstanding Growth Stocks to Own for the Long Run was originally published by The Motley Fool
