Industrials

7 Stocks That Could Surge With a US Infrastructure Program

Paul Ausick

Published: July 2, 2020 10:10 am

Last Updated: July 2, 2020 10:42 am

The U.S. House of Representatives on Wednesday passed the Moving Forward Act, the $1.5 trillion infrastructure bill intended to repair or replace much of the country’s crumbling roads, bridges, schools and communications infrastructure. The bill now moves on to the Senate where it is expected to die quietly.

Officially known as H.R. 2, the bill got its start as a once-in-five-years update to federal transportation spending. Known as the highway bill, the spending part of the bill has more than doubled and its page count has ballooned to roughly 2,300.

The president has endorsed an even larger $2 trillion infrastructure spending plan, but details are scarce.

The bill as passed by the House includes nearly $500 billion for the nation’s highways, bridges and transit systems, along with additional funding to reduce greenhouse gas emissions. Other authorized spending includes $100 billion for affordable housing, $130 billion for schools, $100 billion to install broadband communications across small-town and rural America, and $70 billion to modernize the country’s electricity grid.

Leaving aside the question of whether the Moving Forward Act or some other version has a chance of being enacted, if by some miracle such a bill should pass, it would create thousands, if not millions, of jobs and provide a giant opportunity for companies in the construction business.

Here are seven firms that make and sell construction materials that stand to do well from an infrastructure bill that provides more than $1 trillion in public spending.

Vulcan Materials Corp. (NYSE: VMC) produces and supplies construction materials primarily in the United States. The company’s products include aggregates, asphalt and concrete, all of which are necessary for building and repairing roads and highways. Vulcan’s market cap is near $15 billion and shares closed at $115.95 on Wednesday, essentially flat in a 52-week range of $65.56 to $152.49. Institutional investors hold about 92% of the company’s shares.

With a median price target of $125.00, the implied upside on the stock is 7.8%. Of 23 analysts ratings, there are 15 Buy ratings, seven Holds and one Sell rating. The company is expected to report quarterly earnings per share (EPS) of $1.34 on sales of $1.3 billion for the second quarter. Vulcan’s annual dividend is $1.36 per share, for a yield of 1.17% at the current share price.

United Rentals Inc. (NYSE: URI) is an equipment rental company offering construction, aerial and industrial equipment, and other related tools and services. The company’s trench, power and fluid solutions segment rents trench safety, power and pumping equipment. United Rental’s market cap is $10.1 billion, and shares closed at $145.94 on Wednesday, up 0.1% in a 52-week range of $58.85 to $170.04. Nearly 98% of the company’s stock is held by institutional investors.

The company’s median 12-month price target is $165, implying upside of around 13%. The stock is rated a Buy by 11 analysts and a Hold by eight others. There are no Sell ratings on the stock. Second-quarter estimates call for revenue of $1.8 billion and EPS of $1.62. United Rental does not pay a dividend.

Aecom (NYSE: ACM) engages in designing, building, financing and operating infrastructure assets for governments and businesses worldwide. The company’s market cap is $5.8 billion, and about 89% of outstanding shares are owned by institutional investors. Shares closed at $36.28 on Wednesday, essentially flat for the day, in a 52-week range of $21.76 to $52.40.

The 12-month price target is $45.00, implying an upside of 24%. Analysts’ ratings include nine Buys and two Holds, with no Sell ratings. When the company reports second-quarter results in mid-August, estimates call for EPS of $0.51 and sales of $1.5 billion. Aecom does not pay a dividend.

Nucor Corp. (NYSE: NUE) manufactures and sells steel, steel products and raw materials. In addition to steel sheets and bars, the company’s products division also manufactures steel joists and girders, decking and a variety of other products for the nonresidential construction industry. The stock closed at $40.38 on Wednesday, down about 2.5% for the day, in a 52-week range of $27.53 to $58.70.

The 12-month price target is $45.00, implying an upside of 11.4%. Six analysts currently rate the stock a Buy, five rate it a Hold and two have a Sell or Underperform rating. Nucor is scheduled to report earnings in mid-July, and the consensus estimate calls for EPS of $0.09 and sales of $4.5 billion. The company’s market cap is $12.2 billion, and institutional and mutual fund investors hold about 78% of the stock.

Martin Marietta Materials Inc. (NYSE: MLM) is a natural resource-based building materials company that supplies aggregates and heavy building materials to the construction industry. The company’s market cap is $12.6 billion, and about 98% of the company’s stock is held by institutional investors. Shares closed at $208.96 on Wednesday, unchanged for the day, in a 52-week range of $135.08 to $281.82.

The 12-month price target is $228.50, implying an upside of about 9.5%. The company pays an annual dividend of $2.20 (yield of 1.05%). Shares are rated Buy by 12 analysts and Hold by seven, with one Sell rating. When the company reports quarterly earnings in early August, estimates call for sales of $1.1 billion and EPS of $2.94.

Forterra Inc. (NASDAQ: FRTA) manufactures and sells pipe and precast products used in drainage and water supply projects. The company’s market cap is about $581 million, and around 80% of the stock is held by institutional investors. Shares closed at $11.87 on Wednesday, up nearly 6.3% for the day in a 52-week range of $3.45 to $15.42.

A price target of $10.00 suggests that the shares are either overvalued or that analysts can’t keep up. Forterra is expected to report quarterly EPS of $0.09 and sales of $387 million in early August. The company does not pay a dividend.

Commercial Metals Co. (NYSE: CMC) manufactures, recycles and markets steel and metal products. It is one of the country’s largest makers of rebar, an essential strengthening material for concrete. The company’s market cap is $2.3 billion, and about 60% of the shares are owned by institutional investors. The stock closed at $19.73 on Wednesday, down 0.1% for the day in a 52-week range of $10.76 to $24.04.

The company’s price target of $22.50 implies an upside of 14.2%. Ten analysts’ ratings are evenly divided between Buy and Hold. The company is expected to report quarterly EPS of $0.48 and sales of $1.4 billion in October. Commercial Metals pays an annual dividend of $0.48 (yield of 2.35%).

Missing from this list is a maker of wire and cable for upgrading the nation’s power grid and broadband internet service. The largest U.S. cable manufacturer is General Cable, which was acquired by Italy’s Prysmian Group in 2018. Prysmian has a market cap of $5.51 billion and trades over-the-counter in the United States. Except for privately held Southwire, the world’s largest cable manufacturers are based outside the country.