3 Construction Stocks to Buy as the Sector Booms
A report from the American Institute of Architects noted that the non-residential construction sector expanded by roughly 20% in 2023. That’s a very strong sign from a sector that continues to defy the odds as tighter credit has failed to dampen performance. It should also give investors a reason to consider construction stocks in early February.
Executives surveyed late last year expect a stable to improving market In 2024 and remain broadly confident. Caterpillar’s (NYSE:CAT) strong earnings report on Feb. 5 served to reiterate what those executives said earlier.
Let’s take a look at these three construction stocks to buy within the construction sector that are solid investments.
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Vulcan Materials (VMC)
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Vulcan Materials (NYSE:VMC) is looking like an increasingly strong stock in 2024. That isn’t to say it isn’t a strong stock already. It is. The company is the largest U.S. aggregates producer and generally a stable investment.
Yet, there is reason to believe Vulcan Materials could be improving. Per a recent report from Zacks, analysts have upgraded their outlook on the company three times over the past 60 days. That’s a strong sign the company could surprise investors positively, something the company has been known to do.
Earnings are expected to rise by nearly 35% in 2024. The logic for investing in Vulcan Materials is fairly straightforward: Construction activity continues to be strong in early 2024. All of those construction companies require Aggregates such as crushed rock, gravel, asphalt, cement and other materials the company provides.
Vulcan Materials doesn’t provide a ton of income, although it does come with a modest dividend. Beyond that, it has a low beta, indicating relatively low volatility. It’s safe and predictable and one of the best-positioned firms in a sector that will demand more of its product.
United Rentals (URI)
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The best time to buy shares of United Rentals (NYSE:URI) stock was between the beginning of the year and Jan. 24. URI was another well-known name in the construction sector that benefited from a very strong 2023. The company had a record year and finished out the year with a record fourth quarter. Thus, it should be no surprise that shares jumped upwards substantially on its earnings release on that date.
The company’s focus for 2024 is going to center on satisfying shareholders while also de-leveraging the company.
In 2023, United Rentals repurchased $1 billion worth of shares. The company has committed to repurchasing $1.5 billion worth of shares in 2024. Further, United Rentals spent $406 million on dividends last year. the company will increase that outlay by 10% in 2024.
The company has a relatively high debt-to-equity ratio within its sector, so continuing to de-leverage would likely serve it well overall. United Rentals is looking to reduce its interest expense, which should be possible in 2024 as rates are expected to come down multiple times.
Deere (DE)
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When an investor starts to consider whether to invest in Deere (NYSE:DE) stock, it doesn’t take long to understand how the company feels about the digital age. The homepage of the website is covered with graphics meant to signal a continued commitment to digitizing its business.
That makes strong sense, given how much potential there is for automation and artificial intelligence to improve crop yields and other related areas of agriculture. Deere’s tractors will need to be increasingly tech-forward for that goal to be realized.
A lot of high-profile progress is being made on that front. The Wall Street Journal ran a story a few weeks ago about Deere’s deal with Elon Musk’s SpaceX to utilize its satellites. That partnership will allow deer to remain connected to the internet even in the most remote parts of the world.
StarLink satellites should allow ever more precise agricultural production to be achieved. The story hinted at several improvements on the horizon and greater automation overall.
On the date of publication, Alex Sirois did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
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