3 Elite Blue-Chips With Market-Crushing Potential in 2024
2024 is a year full of uncertainties in the geopolitical and macroeconomic sphere. Amid these risks, elite blue-chip stocks can provide downside protection and offer substantial upside. The market is calm for now, but it is prudent to position your portfolio for the eventual volatility later this year.
Looking at fundamentals, the outlook for corporate earnings continues to be solid. As recent Q4 2023 results revealed, companies beat market expectations with concrete results. According to FactSet earnings insights, with 79% of S&P 500 companies reporting, 75% have reported a positive earnings surprise.
Given this positive earnings backdrop, stocks could rocket higher in 2024. Earnings bottomed out in 2023 and the economy is still growing. Moreover, rate cuts later in the year could boost stocks. With these favorable conditions, these elite blue-chip stocks have substantial upside.
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In terms of price-to-earnings, the three trade below 15 times forward earnings. Also, Wall Street analysts are bullish with “strong buy” ratings. With reasonable valuations, more upside lies ahead for these elite blue-chip stocks.
Delta Airlines (DAL)
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After a stellar 2023, this airline remains one of the elite blue-chip stocks on Wallstreet’s buy list. TipRanks analysts expect an upside of over 25% to the average price target of $53. Optimism is warranted, considering Delta Airlines (NYSE:DAL) has delivered impressive results for several consecutive quarters.
The airline delivered an impressive close to 2023, highlighting the strength in air travel. Full-year operating revenue was $54.7 billion, increasing 20% compared to 2022. Free cash flow was $2 billion and EPS was $6.25. Thus, on a trailing multiple, DAL stock is a bargain at 6.6 times earnings.
That said, the stock is also cheap based on forward earnings. In their year-end results, management issued guidance forecasting $6 to $7 in EPS for 2024. Moreover, they expect free cash flow in the $3 to $4 billion range.
Given these robust fundamentals, Delta Airlines is one of the elite blue-chip stocks to buy today. The airline is renowned for its industry-leading operating performance. On that note, the company closed 2023 with an operating margin of 11.6%. Still, management expects more cost optimization in 2024.
With demand for international travel remaining robust, DAL stock has further upside. At 7 times forward earnings, the stock could see material upside through multiple expansion. And if travel demand surprises to the upside, the stock will have a banner year.
Schlumberger (SLB)
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Recently, Schlumberger’s (NYSE:SLB) stock fell after Saudi Aramco lowered its maximum production target. Investors were riled by the fact that the move would affect Saudi’s offshore oil production, denting the company’s revenue. Considering that the oil services giant is a major player in offshore drilling, this news seemed like a setback.
However, taking things into perspective, this selloff makes Schlumberger one of the top elite blue-chip stocks to buy. Management sees no impact from this news and reaffirmed their fiscal year 2024 guidance. They also reiterated that it expects significant growth from Saudi Arabia in 2024.
Indeed, management expects a multi-year growth cycle in the Middle East to drive growth going forward. After all, global oil demand is still growing. According to the U.S. Energy Information Administration’s outlook, global consumption of liquid fuels will increase, driven by demand in non-OECD Asia, especially India and China. Demand will grow by 1.4 million b/d this year and 1.3 million b/d in 2025.
Oil consumption growth is positive for Schlumberger’s prospects. If the company meets its 2024 outlook, this market overreaction will be one of the best buying opportunities. Management expects mid-teens growth in international and mid-single-digit growth in North America. This revenue growth will drive mid-teens EBITDA growth in 2024.
As of this writing, the oil and gas equipment and services giant trades at 14 times forward earnings. It is a solid shareholder return play with a 2.25% yield and a plan to return $2.5 billion through buybacks. Patient investors who see past the Saudi Aramco news will be rewarded.
T-Mobile US (TMUS)
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With one of the best growth profiles in wireless telecommunications services, T-Mobile US (NASDAQ:TMUS) is a bargain. First, this is one of the most stable businesses in any macro environment. Secondly, it continues to produce solid growth numbers in a very competitive industry.
Looking at industry results, T-Mobile is still outperforming its peers. It delivered another industry-best performance in 2023, highlighting the continued momentum after a very successful merger integration. Postpaid net customer additions were 5.7 million and postpaid net account additions were 3.1 million. Remarkably, the company achieved these industry-leading figures while maintaining the lowest postpaid phone churn in the company’s history.
This industry-leading customer growth allowed the company to generate the best revenue among peers. Postpaid service revenue increased from $45.9 billion to $48.6, representing 6% growth. Core adjusted EBITDA also increased 10.3% to $29.4 billion.
Today, T-Mobile has the best network, with its 5G footprint covering more than 300 million Americans. That’s why management expects a strong 2024, calling for postpaid net customer additions between 5 million and 5.5 million. Core Adjusted EBITDA will also grow 9% to between $31.3 and $31.9 billion.
Based on 2024’s guidance, TMUS stock is valued at 9.6 times EV/EBITDA, making it one of the elite blue-chip stocks to consider. Moreover, management expects $16.3 billion in free cash flow. Finally, the company initiated its first cash dividend last year, which could see substantial growth given the robust cash flow generation.
On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Charles Munyi has extensive writing experience in various industries, including personal finance, insurance, technology, wealth management and stock investing. He has written for a wide variety of financial websites including Benzinga, The Balance and Investopedia.
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