With 2024 on the horizon, investors are researching stocks with strong potential over the next year. The key stocks to invest in 2024 may be found in resilient sectors like defense and aerospace. Companies like General Dynamics and Gulfstream provide essential products and services for U.S. military and allies, buoyed by rising global defense budgets. Their proven business models, long-term contracts, backlogs, product pipelines, dividend track records and share buybacks make them compelling investments amidst market turbulence.
Defense contractor General Dynamics offers stability and growth
General Dynamics generates consistent revenues from supplying critical defense products like M1 Abrams tanks and Columbia-class nuclear submarines. With $91 billion in backlog orders and committed contracts worth $129 billion, the company is well-positioned for growth. Its Gulfstream business aviation unit also promises to boost performance as new aircraft models like the G700 and G800 obtain certifications in 2023-2024. Trading at 14.8x 2024 earnings compared to over 17x for peers Lockheed Martin and Northrop Grumman, General Dynamics stock has 20% upside to the average $265 price target.
Gulfstream production ramp-up provides catalyst
General Dynamics’ Gulfstream unit competes with Bombardier and Dassault in the long-range large-cabin business jet market. Delayed certification of the G700 is expected by Q4 2023, with the G800 following in 2024. This will facilitate a production ramp-up to 140 deliveries in 2023 and potentially 170 in 2024, boosting the segment’s revenue by 30%. An aging global fleet and sustained post-pandemic business air travel demand bodes well alongside massive Gulfstream backlogs.
Reliable dividend growth and buybacks provide stability
General Dynamics has raised its dividend for 26 straight years at a 9% annual rate, now yielding 2.4%. The company also reduced outstanding shares by 25% via buybacks over the past decade. This shareholder-friendly approach brings stability amidst any market turbulence. With double-digit free cash flow growth forecasted in 2024, General Dynamics has further room to enhance shareholder returns.
Favorable sector backdrop despite political risks
Heightened geopolitical tensions and military aid for Ukraine have accelerated defense contractor growth recently. While the prospect of a U.S. government shutdown could spur near-term volatility, historically this has provided good entry points for stocks like General Dynamics. Its essential nature for national security ensures minimal long-term impact, presenting opportunistic timing for investors.
Valuation lags defense peers despite superior growth
Consensus EPS growth expectations for General Dynamics stand at 18% in 2024, outpacing projected single-digit or low double-digit expansion for peers Lockheed Martin and Northrop Grumman over the same period. However, General Dynamics trades at a discount to these defense players based on forward P/E multiples. This indicates upside potential for General Dynamics driven by its growth profile.
With strong backlogs, new product catalysts, dividend track record and discounted valuation, General Dynamics stands out as a compelling stock to invest in 2024 amidst resilience in defense and aerospace sectors.