Key points
- Stocks have been rising since 2020 and hit a record high this week.
- Textron’s outlook for 2024 is extremely bright and expectations are high.
- Now everything is in place for further gains and record closing.
- 5 stocks we like best in Lockheed Martin
A jump of 9% was recorded during Wednesday’s session Textron Inc. New York Stock Exchange: TXT one of the best performing stocks on the market. This latest jump in the Rhode Island-based aerospace company’s stock price confirms that the multi-year rally, which began in 2020, remains intact and is entering its next phase.
The stock closed at a record high on Wednesday, maintaining gains from yesterday’s session. We’ll delve into the finer details below, but for now suffice it to say that Textron has made it clear that this is a must-own aerospace stock for the next few months.
Textron shares are now up more than 300% since the rally began at the height of the pandemic in 2020. While they have softened somewhat over the course of 2022, like almost every other stock out there, the overall upward trend has not has never been cancelled. The outlook remains bright, with risk-on sentiment now sweeping the markets and making stocks the number one asset choice once again.
Nice perspective
Bullish sentiment around Textron’s 2024 outlook has been building since the start of the month. The first week of January saw the Goldman Sachs team upgrade their rating on the stock to “conviction buy,” Goldman’s super-bullish category reserved for only a handful of stocks. Textron’s business jet unit was singled out for particular praise, as was the company’s Bell unit, which is expected to benefit from a $7 billion contract with the U.S. Department of Defense. For those of us on the sidelines, it’s worth noting that Textron beat out both of the traditional DoD favorites, Lockheed Martin Corp New York Stock Exchange: LMT AND Boeing Co NYSE: BA.
Further confirmation of the bullish outlook came this week when Textron beat analysts’ expectations on its earnings. Although the revenue number was a bit weak for the fourth quarter, the company’s forward guidance crushed the consensus, which more than made up for it. Textron now expects EPS to be between $6.20 and $6.40 for the full year versus the original $5.96 that analysts were expecting. You know you’re looking for something special when you find a stock that is capable of recovering for years by offering upside surprises like this while trading at highs.
Beyond the headline numbers, there were additional positives from Textron’s margin growth, cash flow, and order book growth. With all this in mind, it’s no surprise that stocks were at record highs during yesterday’s session.
However, that’s not to say it no longer has room to run or that most of the edge is gone. It’s clear that even after its most recent jump, Textron is still undervalued compared to its competitors. Its forward price-to-earnings (PE) ratio of 15 compares very well to the industry median of 22, so even if you’re thinking of getting involved now, there’s still a sense that there’s a bargain on offer.
High expectations
Likewise, there are increased price targets from analysts, including Goldman, that are expected to drive the stock higher in the coming weeks. Goldman’s price target of $98 was eclipsed yesterday by the Citi team, which reiterated a “buy” rating on Textron shares, giving them an increased price target of $104.
The maximum target points to a further upside of about 20% from where shares closed on Thursday. Such is the momentum on the offering right now, with virtually every factor working in the company’s favor, that it’s not too difficult to see them achieve this goal in the near term. Investors should look for shares to continue to consolidate this week’s gains above the $85 mark, allowing them to form a new base to work higher.
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