Wall Street has been witnessing an impressive rally in 2023 buoyed by steadily decreasing inflation and a simultaneous reduction in the magnitude and number of interest rate hikes by the Fed. Investors' growing belief that the central bank will halt rate hikes amid cooling inflation is turning attention to potential rate cuts in the upcoming year.
According to CME’s FedWatch tool, traders are currently associating nearly 100% probability that the central bank will keep the benchmark lending rate unchanged at the range of 5.25-5.5% in the December FOMC meeting. Moreover, 62% of respondents expect the first rate cut to be initiated in the March 2024 FOMC meeting.
A likely rate cut in 2024 will be immensely helpful for multi-sector-conglomerates. Lower market interest rates will reduce the cost of funds thereby enabling companies to undertake projects and increase capital expenditure. Multi-sector conglomerate stocks offer solid diversification to investors’ portfolios. Their diverse operations are ideal for exposure to a variety of markets.
Our Top Picks
We have narrowed our search to five multi-sector conglomerates that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the past 30 days.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
General Electric Co. GE has been benefiting from the strong performance of the Aerospace unit, driven by robust demand and solid execution in commercial engines and services. With strength in GE Gas Power services and growth at Grid business and Onshore Wind in North America, signs of improvement in GE Vernova (the combined operations of GE Power and Renewable) hold promise. Due to these tailwinds, GE has raised its 2023 guidance.
General Electric has an expected revenue and earnings growth rate of 8.5% and 69%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 4.2% over the past 60 days. GE currently carries a Zacks Rank #3 (Hold).
3M Co. MMM has benefited from strength in roofing granules, auto original equipment manufacturer and medical solutions businesses. Improvement in supply chains and easier availability of labor and raw materials should drive MMM’s performance in 2023. Pricing actions and restructuring savings are aiding MMM’s margins.
3M has an expected revenue and earnings growth rate of 2% and 8%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 1.8% over the past 30 days. MMM currently carries a Zacks Rank #2 (Buy).
ITT Inc. ITT has been benefiting from strength across its industrial, aerospace and defense end-markets and strong operational execution. Solid momentum in the aftermarket business, driven by strength in energy and mining markets, is aiding the Industrial Process unit.
Growth in component sales within the aerospace and defense markets is supporting the Connect & Control Technologies unit. ITT’s innovation investments are likely to support its growth. ITT’s shareholder-friendly policies are praiseworthy.
ITT has an expected revenue and earnings growth rate of 4.9% and 11.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.1% over the past 30 days. ITT currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Markel Group Inc. MKL strives to grow via acquisitions and organic initiatives to diversify its portfolio and expand its international footprint. Solid performance in the Insurance segment should drive premiums. MKL benefits from its niche focus and effective management of insurance risk.
MKL is banking on the strength of its underwriting, investment and Markel Ventures operations, which position it well for long-term growth and offer a sturdy capital position that enables it to deploy capital effectively. MKL looks to double the size of its insurance operations.
Markel Group has an expected revenue and earnings growth rate of 7.2% and 16.8%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 1.2% over the past 30 days. MKL currently carries a Zacks Rank #3.
Honeywell International Inc. HON has benefitted from strength in the commercial aviation, defense and space, aerospace and process solutions businesses. Solid operational execution, pricing actions and cost-control measures continue to drive the company’s top line. HON’s bullish forecast for 2023 holds promise. HON’s recent acquisition of Compressor Controls enhances its expertise in industrial control, automation and process solutions.
Honeywell International has an expected revenue and earnings growth rate of 5.2% and 8.9%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.1% over the past 30 days. HON currently carries a Zacks Rank #3.
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