Industrials
5 Stocks May Be Huge Winners From Infrastructure Spending Coming in 2021
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One thing we have learned over the past four years is that there is very little that the two political parties agree on, and the gulf between the two seems to keep widening. However, one issue has broad bipartisan support, and that is on infrastructure in the United States, and the critical need for something to be done, and done soon.
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A new Jefferies research report makes the case that almost regardless of who wins the upcoming election, which is now less than three weeks away, infrastructure is an agenda item that Republicans and Democrats can and will find common ground on. They noted this in the research report:
Assuming bipartisan support, a potential long-term infrastructure reform bill will come down to timing and funding. In terms of timing, if we do see a Blue Wave it will likely take the Senate several months to settle in, leading to committees perhaps focusing on infrastructure around February-March Though the INVEST in America Act was passed in the House this year, it was truly planned to be ready for 2021, but ultimately it will depend on how quickly Congressional leadership prioritize it.
Multiple industrial subsectors look poised to benefit from the infrastructure spending, and the Jefferies team spotlighted numerous companies that could benefit the most. We picked five Buy-rated stocks that look like solid ideas for growth investors looking to cash in on what could be a very profitable upcoming scenario. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Deere
Equipment company’s products certainly will be in demand, and this is a leader. Deere & Co. (NYSE: DE) is the largest manufacturer/distributor of agricultural equipment worldwide, with leading market shares in large farm-equipment segments.
Its Construction and Forestry segment, which should benefit the most from an infrastructure push, offers a range of machines and service parts used in construction, earthmoving, road building, material handling and timber harvesting, including backhoe loaders; crawler dozers and loaders; four-wheel-drive loaders; excavators; motor graders; articulated dump trucks; landscape loaders; skid-steer loaders; milling machines; recyclers; slipform pavers; surface miners; asphalt pavers; compactors; tandem and static rollers; mobile crushers and screens; mobile and stationary asphalt plants; log skidders; feller bunchers; log loaders; log forwarders; and log harvesters and related logging attachments.
Shareholders receive a 1.28% dividend. Jefferies has a $230 price objective on the shares, while the Wall Street consensus target price is $232.00. Friday’s close for Deere stock was above both levels at $240.06 per share.
Martin Marietta
This remains a favorite across Wall Street, especially if a large infrastructure package emerges. Martin Marietta Materials Inc. (NYSE: MLM) is one of the largest U.S. suppliers of aggregates, with operations across 27 states, Canada and the Bahamas. Its largest concentration is in Texas, comprising approximately a third of its exposure.
The company remains upbeat on construction demand and noted that many states with its greatest exposure were well positioned for housing and public nonresidential construction growth.
Investors receive a 0.98% dividend. The Jefferies price objective is $314, and the consensus figure was last seen at $264.50. Martin Marietta Materials stock ended Friday’s trading at $258.97 a share.
Oshkosh
This off-the-radar stock may hold some of the largest upside potential for investors. Oshkosh Corp. (NYSE: OSK) designs, manufactures and markets specialty vehicles and vehicle bodies worldwide.
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The company’s Access Equipment segment likely would benefit the most from an infrastructure build as it provides aerial work platforms and telehandlers for use in various construction, industrial, institutional and general maintenance applications. This segment also offers rental fleet loans and leases, and floor plan and retail financing through third-party funding arrangements; towing and recovery equipment; carriers and wreckers; equipment installation services; and chassis and service parts sales.
Oshkosh stock investors receive a 1.50% dividend. The $95 Jefferies price target compares with an $89.13 consensus target and the most recent closing price of $80.05 a share.
Terex
Investors looking for a stock that could surprise both this year and in 2021 may want to look here. Terex Corp. (NYSE: TEX) manufactures and sells aerial work platforms, materials processing machinery and cranes worldwide.
Terex has AWP equipment, utility equipment, telehandlers and light towers, as well as related components and replacement parts under the Terex and Genie brands, to construct and maintain industrial, commercial, institutional, and residential buildings and facilities; construction and maintenance of utility and telecommunication lines; tree trimming; certain construction and foundation drilling applications; and for other commercial operations, as well as infrastructure projects.
Jefferies has set a $30 price target. The consensus target is $21.38, but the last Terex trade on Friday was reported at $24.43.
Vulcan Materials
Shares of this top company have been on a roll in 2020 and look to press even higher the rest of the year. Vulcan Materials Corp. (NYSE: VMC) is one of the largest producers of construction aggregates (crushed stone, sand and gravel) in the United States and a significant producer of aggregates-based construction materials (ready-mixed concrete and asphalt mix). Its largest revenue-generating states are Texas, California, Virginia, Georgia, Florida, Tennessee, Arizona, Illinois, North Carolina and Alabama.
Earnings grew 8% last quarter to $1.60 per share, and sales were flat at $1.32 billion. However, those numbers topped Wall Street estimates. Also note that some of the top hedge funds have been adding shares lately, very possibly looking for an infrastructure bounce in 2021.
Investors receive a 0.93% dividend. The Jefferies price objective is $173. The posted consensus price is $147.00, and Vulcan Materials stock ended last week at $146.42 per share.
All five stocks have been acting very well, as Wall Street and investors are anticipating some sort of agreement, as this extremely important project is sorely needed across the country. Again, regardless of who wins the election, this issue looks poised to come up fast in 2021. With earnings for the quarter coming in, it may make sense to buy partial positions here and look for the results.
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