What makes Textron a must-own aerospace stock for 2024?

A 9% jump during Wednesday's session made Textron Inc. NYSE: TXT one of the best-performing equities on the market. This latest jump in share price for the Rhode Island-based aerospace company confirms that the multi-year rally, which started in 2020, remains intact and is entering its next phase. 

The stock closed at a record high on Wednesday, holding onto the gains during yesterday's session. We'll dive into the finer details below, but for now, suffice to say that Textron has made it clear it's a must-own aerospace stock for the coming months. 

Textron shares are now up more than 300% since the rally kicked off during the depths of the pandemic back in 2020. While they softened a little during 2022, like almost every other stock out there, the overall upward trend never came undone. The outlook remains bright with a risk-on sentiment now sweeping markets and making stocks the number one asset choice again. 

Positive outlook

Bullish sentiment around Textron's 2024 prospects has been building since the start of the month. The first week of January saw the Goldman Sachs team upgrade its rating on the stock to a "conviction buy," Goldman's uber-bullish category, reserved for only a handful of stocks. Textron's business-jet unit was singled out for particular praise, as was the company's Bell unit, which should benefit from a $7 billion contract with the U.S. Department of Defense. For those of us on the sidelines, it's worth noting that Textron beat out both of the traditional DoD favorites, Lockheed Martin Corp NYSE: LMT and Boeing Co NYSE: BA. 

More confirmation of the bullish outlook was forthcoming this week when Textron topped analyst expectations on their earnings. While their revenue number came in a little soft for Q4, the company's forward guidance crushed the consensus, which more than made up for it. Textron is now expecting EPS to land between $6.20 and $6.40 for the full year versus the original $5.96 analysts were expecting. You know you're onto something special when you find a stock that is able to rally for years while delivering upside surprises like this while trading at highs.

Beyond the headline numbers, there were further positives from Textron's margin growth, cash flow, and backlog growth. With all that in mind, it's little surprise that shares found themselves at record highs during yesterday's session. 

However, that's not to say that it doesn't have more room to run or that most of the edge is gone. There's a strong case that even after the most recent jump, Textron is still undervalued relative to its peers. Its forward price-to-earnings (P.E.) ratio of 15 compares very well against the sector median of 22, so even if you're considering getting involved now, there's still the sense that there's a bargain on offer. 

High expectations

In a similar vein, there are the boosted price targets from analysts, Goldman included, that should pull the stock higher in the coming weeks. Goldman's price target of $98 was eclipsed yesterday by the Citi team, who reiterated their "buy" rating on Textron shares while giving them a boosted price target of $104. 

The street-high target points to a further upside of some 20% from where shares closed on Thursday. Such is the momentum on the bid right now, with pretty much every factor going in the company's favor, that it's not too difficult to see them hitting that in the near term. Investors should look for shares to keep consolidating this week's gains above the $85 mark, allowing them to form a new base to work higher.