3 blue-chip stocks with growth potential you can’t miss

Honeywell International (HON -1.08%), ABB (ABB -1.38%)and UPS (UPS -2.10%) are three attractive companies for long-term investors. All three companies have management teams with the ability and commitment to deliver significant value for investors for many years. Moreover, they already have implemented actions that will result in substantial earnings growth.

1.Honeywell International

Mature industrial conglomerates don’t always have to be boring, low-growth companies. Honeywell, for example, is full of growth initiatives, which management calls its “breakthrough initiatives.” They include Honeywell’s software business, Honeywell Connected Enterprise, which customers can use to digitally transform their businesses. Examples include generating efficiencies in the performance of a building’s systems using mass data collected through wireless sensors to create actionable insights.

Quantinuum is a high-growth quantum computing company majority-owned by Honeywell that management estimates will generate $2 billion in annual sales by 2026. Honeywell Unmanned Aerial Systems and Unmanned Aerial Mobility manufacture avionics and propulsion for unmanned cargo vehicles and air taxis. The company recently signed an agreement with Archer Aviation to provide technology on Archer aircraft. Finally, its Sustainable Technology Solutions (STS) is a leader in renewable fuels, energy storage technology and advanced plastics recycling. Management estimates that STS will grow its revenue from $200 million in 2021 to $700 million by 2024.

As a result of these growth initiatives, management raised its long-term annual growth estimate earlier this year to 4%-7% from a previous target of 3%-5%. Trading on a forward P/E ratio below 18, Honeywell is a good value for its growth prospects.

2.ABB

This European industrial giant hasn’t always been the best-run company in the industrial sector, but it has always had an exciting collection of businesses. For example, it owns one of the world’s leading robotics companies, and it’s also a major player in discrete (or factory) automation and process automation (the processing of raw materials). So many areas of growth in the new economy which favors automated production and the use of digital technology to improve operational performance.

ABB benefits as advances in digital technology make automation more attractive and increased adoption of automation increases digital adoption, thereby increasing investment in digital technology. Additionally, ABB’s electrification solutions (including an electric vehicle charging business) are well positioned to take advantage of the current electrification trend.

ABB has long had great businesses, and since taking office in 2020, CEO Bjorn Rosengren has set the company on a path to realizing value through restructuring. It is a combination of operational restructuring (leaving ABB’s old matrix structure), selling non-core businesses and focusing on increasing the company’s margins. If Rosengren can achieve this goal, then there is a substantial upside opportunity with the title. Trading at less than 16 times Wall Street analysts’ earnings estimates for 2023 and with great long-term growth potential, ABB is an attractive stock.

3. UPS

It’s a bit of a myth that Amazonthe evolution of delivery has threatened the revenue potential of UPS and other delivery companies. In reality, there’s more than enough e-commerce and other delivery for everyone, and UPS’s job is to maximize the profitability of doing so. Armed with this knowledge, CEO Carol Tomé’s “better, not bigger” framework makes perfect sense – UPS doesn’t seek volume for volume’s sake. Instead, it maximizes the profitability of its deliveries. One way to do this is to implement a transformation strategy of building relationships with targeted markets, including small and medium-sized businesses and healthcare companies.

There are concerns about its near-term prospects due to its exposure to the global economy. However, the proof is that UPS’s strategy is working. For example, its delivery volumes were actually decline even though revenues and profits keep growing. Therefore, if Tomé continues to grow its margin and earnings in the coming years, UPS will be a smart buy for investors. UPS is trading at less than 13 times Wall Street’s earnings estimates for 2023 and represents good value for investors willing to bear short-term downside risk.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Lee Samaha holds positions at Honeywell International. The Motley Fool holds positions and recommends ABB and Amazon. The Motley Fool has a disclosure policy.

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