Time to Buy These Infrastructure-Related Stocks
Dating back to the first Industrial Revolution in the 1700s, the United States has historically been a nation that is heavily concentrated on building its infrastructure.
Although the U.S. remains one of the global leaders in terms of infrastructure it has slipped behind China in regards to industrial output. This is partly responsible for President Biden’s implementation of the Bipartisan Infrastructure Law which is a compromise between Democrats, Republicans, and Independents.
Image Source: Federal Highway Administration
The Bipartisan Infrastructure Law is a historic investment to rebuild America’s “crumbling” infrastructure with over $220 billion already dispersed to different states. Many infrastructure-related companies are receiving a boost as the bill is aimed at rebuilding roads and bridges, replacing lead pipes, increasing high-speed internet delivery, and providing cheaper and cleaner energy.
With engineering crucial to many of these infrastructure components, it’s notable that the Zacks Engineering - R and D Services Industry is currently in the top 18% of over 250 Zacks industries.
Critical to infrastructure and broader economic growth here are three top-rated stocks in the industry that are worthy of investors’ consideration.
Willdan Group (WLDN)
We’ll start with Willdan Group which covets a Zacks Rank #1 (Strong Buy) at the moment. Willdan is a provider of professional technical and consulting services to utilities, private industry, and public agencies at all levels of government.
Willdan helps its clients with a broad range of specialized services relating to energy efficiency and sustainability, engineering and planning, economic and financial consulting along with national preparedness and interoperability.
Last month, CEO Tom Brisbin stated Willdan’s most recent fiscal first quarter was the strongest in the company’s history with consolidated contract revenue growing 11.7% YoY and net revenue expanding 23%. Even better, earnings soared 357% to $0.32 per share compared to EPS of $0.07 in Q1 2022 and obliterated Q1 EPS estimates of -$0.01.
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With infrastructure-related spending increasing throughout the nation, Willdan stock looks very attractive at $17 a share and 14.6X forward earnings. This is nicely beneath the industry average of 22.8X and the S&P 500’s 20.2X.
Willdan’s earnings are now forecasted to climb 40% this year at $1.23 per share compared to EPS of $0.88 in 2022. Plus, fiscal 2024 earnings are projected to jump another 17% at $1.44 a share.
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Sterling Infrastructure (STRL)
Sporting a Zacks Rank #2 (Buy) Sterling Infrastructure has remained one of the more popular infrastructure-related stocks among investors.
Sterling is benefiting from the United States’ aspiration to build domestic infrastructure that supports the production of electric vehicles (EVs) and solar products. To that point, Sterling Infrastructure reported $325 million of new contracts during the first quarter which includes its site development project for Hyundai Engineering America, Inc.
Shares of STRL have now soared +61% year to date to largely outperform the S&P 500’s +14% and the Nasdaq’s +29%. More impressive, over the last decade, Sterling stock has now skyrocketed +483% which has also impressively outperformed the broader indexes.
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Specializing in E-Infrastructure, building, and transportation solutions, Sterling’s earnings are expected to rise 11% this year and jump another 16% in FY24 at $4.11 per share.
Considering this year’s impressive rally, Sterling's P/E valuation is still reasonable at $52 a share and 14.8X forward earnings. This is intriguingly below the industry average of 22.8X and the benchmark.
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Gates Industrial (GTES)
Rounding out the list is Gates Industrial which sports a Zacks Rank #2 (Buy). Gates is a manufacturer of engineered power transmissions and fluid power solutions to diverse replacement channel customers and original manufacturers as specified components.
Gates’ primary reach is to agriculture, construction, manufacturing, energy, and consumer application industries. The company’s attractive stock price at $13 a share is supported by its P/E valuation and modest growth.
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At 11X forward earnings, Gates' stock trades at a considerable discount to the industry average of 22.8X and the benchmark’s 20.2X. It’s also noteworthy that Gates' stock trades 73% below its historic high of 40.9X since going public in 2018 and nicely beneath the median of 12.8X.
Furthermore, Gates’ earnings are projected to rise 3% this year and jump another 14% in fiscal 2024 at $1.35 per share.
Image Source: Zacks Investment Research
Takeaway
The services of these companies will be in high demand as infrastructure spending increases in correlation with President Biden’s Bipartisan Infrastructure bill. With the bill passed for $1.2 trillion and $220 billion already dispersed the business environment should remain strong for the Zacks Engineering - R and D Services Industry.
To that note, it looks like an opportunistic time to buy Willdan Group, Sterling Infrastructure, and Gates Industrial stock with their valuations very reasonable considering the boost they may receive.
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Willdan Group, Inc. (WLDN) : Free Stock Analysis Report
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