Great stock ideas can be found in all segments of the market. The three companies below are very different, but for their own reasons, they are all great growth stocks. Here's a look at why contract logistics provider GXO Logistics (GXO 1.68%), Delta Air Lines (DAL 2.45%), and heating, ventilation, and air conditioning (HVAC) company Carrier Global (CARR 0.30%) are all great stocks to buy for growth investors.
GXO Logistics
GXO Logistics operates in the e-commerce space, which should enjoy continued long-term growth. GXO offers warehousing, distribution, logistics, and supply chain solutions to a diverse customer base, with no one customer accounting for more than 4% of its revenue.
Its 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.
NYSE: GXO
Key Data Points
Notably, GXO's services offer substantial advantages to its customers. For instance, it can slash variable warehousing costs by 50%, boost inventory turnover, and reduce overall costs. These improvements translate into higher earnings and more efficient use of working capital for the customer.
Furthermore, GXO's competitive edge is set to sharpen as it continues integrating cutting-edge technology into the warehouses it designs and operates for clients. This includes machine vision for quality control and monitoring, automation and robotics for workflow enhancement, 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 clients to use GXO and other contract logistics providers.
Delta Air Lines
Delta Air Lines should enjoy revenue growth in line with the economy at large. However, that's not the reason to buy the stock. The real reason comes down to Delta's growing focus on the premium traveler, where it expects revenue to grow more than the economy. This includes its "loyalty and other" revenue, which it expects to grow significantly more than the economy.
NYSE: DAL
Key Data Points
Delta sees further potential in its SkyMiles loyalty program and its co-branded Delta SkyMiles American Express cards. The latter is an increasingly important part of the investment case for the stock, as Delta expects payments from American Express to grow from $6.8 billion in 2023 to $10 billion over the long term.
The two earnings drivers -- premium travelers and payments from American Express -- are symbiotic. Attracting higher-income travelers on Delta Air Lines leads to them obtaining Delta American Express cards, which results in more spending on the cards.
Delta is set to rapidly expand its free cash flow (FCF) generation from $2 billion in 2023 to $3 billion-$4 billion, allowing it to reduce debt.
The low end of that FCF range would leave the stock trading at less than 11 times FCF in 2024. Delta remains an excellent value stock for investors comfortable with an ongoing travel recovery combined with an increasing attention to 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 been refocusing the business on its key growth markets of "intelligent climate and energy solutions." As part of this move, management sold its remaining shares in commercial and industrial refrigeration company Beijer Ref for around $300 million in 2020.
NYSE: CARR
Key Data Points
Its 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 for $4.95 billion followed this year. Moreover, Carrier has an agreement in place to sell its commercial refrigeration and industrial fire business, and has started a sales process of its commercial and residential fire business.
Along with the divestitures, Carrier has made a $12 billion strategic acquisition of European heat pump and solar photovoltaics company Viessmann Climate Solutions. The deal aims to shift Carrier's focus toward energy transition technologies, with Viessmann's solutions aligning naturally with Carrier's core heating, ventilation, and air conditioning (HVAC) businesses.
Image source: Getty Images.
The portfolio restructuring created a global business focused on climate technologies and energy transition solutions, positioning it for long-term growth. It's an attractive business favored by regulatory changes, and Carrier's valuation (it trades at 19 times estimated FCF for 2025) makes it a stock to consider buying for long-term investors.
