The shares of these 3 companies are losing in 2024, but a spectacular recovery can be expected in the second half

Shares in UPS (NYSE:UPS)aerospace materials company Hexcel (NYSE:HXL)and a security door and lock company Plea (NYSE: ALLE) all saw a significant decline in 2024, falling behind S&P500 the index is up 14.6% over the same period. However, compelling evidence suggests that all three companies are poised to outperform the market in the second half of the year and beyond. Therefore.

The case of investing in UPS stock

Parcel delivery giant UPS faced a turbulent 2023, with some challenges spilling over into the first half of 2024. Slowing economic growth led to a decline in volume growth and revenue growth. Costly termination of employment made the situation even worse. Worse still, prolonged labor negotiations led to customers redirecting their deliveries to other chains, fearing a strike.

However, these negative factors will turn negative in the second half, as management believes that year-over-year volume growth will begin in the second quarter in the U.S. Meanwhile, the increase in costs resulting from the labor contract is now visible in the numbers, so comparisons to last year will be easier. In response to weaker demand, UPS is laying off 12,000 workers.

All signs point to a stronger second half, with management’s guidance calling for adjusted operating profit to increase by 20%-30% in the second half compared to the same period in 2023.

The key to the turnaround, and a metric investors should watch closely when UPS reports second-quarter earnings on July 23, is a return to growth in U.S. shipping volumes. Management previously said it expects slightly positive average daily growth in U.S. shipping volumes in the second quarter. If that happens, UPS will be well on its way to a recovery in 2024.

Hexcel investors worry about Boeing

There is no doubt that Hexcel has great long-term growth prospects. Advanced composites provide advantages in terms of weight and strength compared to traditional materials such as aluminum. This is a major issue in aerospace, as it helps optimize fuel consumption and reduce operating and maintenance costs over the life cycle, especially for wide-body aircraft.

Therefore, there is a clear trend of new aircraft using more advanced composite materials. Meanwhile Boeing AND Airbus they have many years of backlog and want to increase production. Everything points to a bright future for Hexcel.

That said, there will be some short-term turbulence in 2024, which is why the company’s shares have fallen.

In short, because there is little demand for Hexcel’s aftermarket products when aircraft deliveries slow down at one of its ultimate end customers, in this case Boeing, Hexcel could feel it in its orders. Unfortunately, the slowdown at Boeing creates uncertainty and investors are worried. In addition, Hexcel is building its infrastructure to support solid future growth, holding back near-term profit margins.

The story continues

All in all, it’s understandable that investors may have concerns. However, these are short-term issues and Boeing will certainly increase its aircraft production rate in the second half of the year and then increase it in the future. As such, investors in Hexcel can expect continued sales recovery and margin expansion in the coming years.

Allegion secures the future

The manufacturer of security doors and locks also has a bright future. It is leading the movement towards the convergence of electronic and mechanical security products, which has countless benefits. Wireless technology allows building owners to remotely monitor and control access areas. As a result, they can reduce shrinkage, improve security, grant and deny access on a daily basis, and improve workflow efficiency by knowing which employees are in which areas at all times.

The value added is significant, and considering that only about 30% of sales are for electronic products and the adoption rate of electronic locks in North America is just 10%, the potential for growth is large.

Still, investors are concerned about the company’s exposure to the North American residential real estate market in 2024, and it doesn’t help that overall first-quarter sales declined 3.6% on an organic year-over-year basis.

However, both issues are likely to be temporary. The North American housing market will improve in a lower interest rate environment. In addition, the decline in first-quarter revenue is largely due to a difficult comparison with the first quarter of 2023, when organic sales were up 15% on an organic basis. In a two-year comparison, sales were up 5.3% on a compound annual growth rate.

As a result, the stock price decline appears to be a great buying opportunity for long-term growth.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Hexcel and United Parcel Service. The Motley Fool has a disclosure policy.

These 3 Stocks Are Down in 2024, but Could Make a Spectacular Recovery in the Second Half of the Year Originally published by The Motley Fool