These 3 stocks are falling in 2024, but a spectacular recovery can be expected in the second half of the year

Shares in UPS (UPS 0.75%)aerospace materials company Hexcel (HXL -1.84%)and a security door and lock company Plea (ALL 1.57%) all saw a significant decline in 2024, falling behind S&P500 the index increased by 14.6% in the same period. However, compelling evidence suggests that all three companies are capable of outperforming the market in the second half of the year and beyond. This is why.

The Case for Investing in UPS Stocks

Parcel delivery giant UPS had a tumultuous 2023, with some challenges spreading into the first half of 2024. Slowing economic growth led to a decline in shipment volumes and an increase in revenues. The situation was further exacerbated by the costly termination of the employment contract. Worse still, prolonged labor negotiations led to customers redirecting deliveries to other chains for fear of strike action.

However, these unfavorable factors will turn unfavorable in the second half as management believes year-over-year volume growth will begin in the US in the second quarter. Meanwhile, the increase in costs resulting from the employment contract is now visible in numbers, so comparisons with last year will be easier. UPS lays off 12,000 workers in response to weaker demand.

All indications are that the second half of the year will be stronger, with management forecasting an increase in adjusted operating profit of 20-30% in the second half of the year compared to the same period in 2023.

The key to the turnaround, and a metric investors should watch closely when UPS reports second-quarter results on July 23, is a return to growth in U.S. shipping volumes. Management has previously said it expects slightly positive average daily volume growth in the U.S. 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 weight and strength advantages over traditional materials such as aluminum. This is a major issue in aerospace as it helps optimize fuel consumption and reduce life cycle operating and maintenance costs, especially for wide-body aircraft.

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

Still, 2024 is expected to see some turbulence in the near future, which is causing the company’s stock value to fall.

UPS Data by YCharts

In short, because Hexcel’s aftermarket demand is weak when aircraft deliveries to one of its end-market customers, in this case Boeing, are weak, Hexcel could feel it in its orders. Unfortunately, the slowdown at Boeing is causing uncertainty and investor concerns. Furthermore, Hexcel is building its infrastructure to support solid future growth, holding back near-term profit margins.

In summary, it is understandable that investors may be concerned. However, these are short-term concerns and Boeing will certainly increase the pace of aircraft production in the second half of the year and then further increase it in the future. As such, Hexcel investors can expect continued sales recovery and margin expansion in the coming years.

Allegion secures the future

The future is bright for manufacturers of security doors and locks, too. They are leading the movement towards the convergence of electronic and mechanical security products, which brings with it 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 productivity by knowing which employees are in which areas at all times.

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

Still, investors are concerned about the company’s exposure to the North American housing market in 2024, not helped by the fact that overall first-quarter sales declined organically by 3.6% year-over-year.

However, both problems will likely prove to be temporary. The North American housing market will improve in a lower interest rate environment. Additionally, the decline in revenue in the first quarter is largely due to a difficult comparison to the first quarter of 2023, when organic sales increased by 15% on an organic basis. On a two-year comparison, sales increased by 5.3% at a compound annual growth rate.

As such, the share price decline appears to be a great buying opportunity in a long-term growth story.