Overshadowed in the ongoing debate over the Keystone XL Pipeline is the fact that a surge of pipeline announcements and awards were made in the first half of this year. With the U.S. and North American energy sector ramping up to full speed ahead, oil pipeline spending is expected to grow an astonishing 55.4% this year, and natural gas pipeline spending is expected to grow 24.6%.
In a new report from the energy infrastructure team at Stifel, the good times don’t end this year. They expect 2015 spending to continue on the same upward positive track, and the report pointed to numerous new announcements since the last update that will help to drive numbers substantially higher. With natural gas liquids (NGL) pipelines also adding to the mix, some of the top stocks may show large revenue gains.
Here are the five stocks rated Buy at Stifel that stand to benefit in a big way from this increased amount of spending.
Aegion Corp. (AEGN) reported earnings slightly below expectations this week, but reaffirmed its guidance for the rest of 2014. The company is a global leader in infrastructure protection and maintenance, providing proprietary technologies and services. Its business activities include manufacturing, distribution, maintenance, construction, installation, coating and insulation, cathodic protection, research and development and licensing. Stifel has a $27 price target for the stock. The Thomson/First Call consensus target is posted at $26.43. The stock closed Wednesday at $22.98.
MasTec Inc. (MTZ) is a leading infrastructure construction company operating mainly throughout North America across a range of industries. Its primary activities include the engineering, building, installation, maintenance and upgrade of energy, utility and communications infrastructure, such as electrical utility transmission and distribution; natural gas and petroleum pipeline infrastructure; wireless, wireline and satellite communications; power generation, including renewable energy infrastructure; and industrial infrastructure. Stifel has a massive $41.50 price target, and the consensus target is $42.05. Shares closed Wednesday at $27.30. Trading to the targets could represent a 50% gain for investors.
Powell Industries Inc. (POWL) engineers packaged solutions and systems for the control, distribution and management of electrical energy and other dynamic processes. Powell markets include large industrial customers such as utilities, oil and gas producers, refineries, petrochemical plants, pulp and paper producers, mining operations and commuter railways. Investors are paid a 1.6% dividend. The Stifel price objective is $77, and the consensus target is $74.25. The stock closed Wednesday at $59.83.
Quanta Services Inc. (PWR) is a leading specialized contracting services company, delivering infrastructure solutions for the electric power and oil and gas industries. Quanta's comprehensive services include designing, installing, repairing and maintaining energy infrastructure. Additionally, Quanta licenses point-to-point fiber optic telecommunications infrastructure in certain markets and offers related design, procurement, construction and maintenance services. Stifel puts a $42 target on the stock, while the consensus figure is $40.67. Quanta closed Wednesday at $34.97.
Willbros Group Inc. (WG) is a specialty energy infrastructure contractor serving the oil, gas, refining, petrochemical and power industries. Their business offerings include engineering, procurement and construction (either individually or as an integrated EPC service offering), turnarounds, maintenance, facilities development and operations services. Stifel has a $14 price target, and the consensus target is $12.57. Willbros closed Wednesday at $12.01.
Most of these stocks have not yet reported second-quarter earnings. Investors looking to add these companies to their portfolio may want to do their own due diligence in an effort to time any stock purchases. It is important to know that, seasonally, the second half of the year is always the best for them, so waiting for earnings to be announced may make good sense.