As government initiatives continue to channel significant funds into revitalizing America’s infrastructure, the appeal of infrastructure stocks seems more vibrant than ever. A notable driver behind this excitement is the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law (BIL), signed into law in November 2021 and still running today. This landmark legislation sets out to modernize the nation’s crumbling infrastructure, focusing on key areas like roads, bridges, water systems and broadband networks with a robust infusion of federal capital.
As the IIJA moves forward, infrastructure stocks are set to retain quite strong momentum. Companies with exposure in this space are poised to keep reaping the benefits of sustained federal investment, leading to promising revenue and earnings growth. In this article, we’ll take a look at three infrastructure stocks well-positioned to keep capitalizing on the ongoing wave of government spending. These firms operate in critical segments of the infrastructure landscape, making them compelling choices for investors eager to tap into the current boom.
Jacobs Solutions (J)
Jacobs Solutions (NYSE:J) stands out as a top contender among infrastructure stocks thanks to its key role in engineering, design and construction management. As a leader in delivering complex project solutions and consulting services, Jacobs is exceptionally well-positioned to capitalize on the ongoing infrastructure boom.
The company has achieved impressive growth lately, with revenues and earnings per share (EPS) reaching new heights last year — $16.35 billion and $5.33, celebrating year-over-year increases of 9.6% and 6.4%, respectively. This growth highlights Jacobs’ strong foothold in managing large-scale infrastructure projects and its capacity to thrive amid rising demand.
Further, Jacobs’ current share price implies strong upside potential. Trading at 17.7 times this year’s expected EPS, the stock seems rather attractively priced, especially given Wall Street’s projections for double-digit EPS growth through at least 2028. Moreover, Jacobs boasts a robust $29.4 billion backlog, which should provide the company with significant visibility and improve its investment appeal. Therefore, I see the stock as a great pick to capitalize on the current industry conditions.
Vulcan Materials (VMC)
Another company that tends to benefit from rising government spending on infrastructure projects is Vulcan Materials (NYSE:VMC). Being the largest producer of construction aggregates in the United States, Vulcan plays a vital role in supplying the critical materials — such as crushed stone, sand and gravel — that support infrastructure projects like roads, bridges and urban developments.
Therefore, with the ongoing wave of government investment in infrastructure, Vulcan’s products are in high demand, directly boosting the company’s revenue and earnings. For example, their materials are pivotal for major highway construction and city expansions, making Vulcan a central beneficiary of these initiatives. Evidently, Vulcan’s revenues grew to $7.78 billion, and its earnings per share (EPS) rose to $7.06 last year, marking increases of 6.4% and 58.7%, respectively. Both figures represent new records for the company.
Vulcan is set to sustain its ongoing momentum, with Wall Street expecting that its EPS will grow by a further 19.8% this year to $8.39. Also, double-digit growth is expected to last in FY2025 and FY2026 as well. For this reason, I believe the stock is quite attractively priced today at a P/E of 31.8 times based on this year’s EPS forecast. The multiple may seem rich, but it becomes very easy to justify when you factor in the underlying tailwinds.
Caterpillar (CAT)
I couldn’t possibly finish this list of infrastructure stocks without including Caterpillar (NYSE:CAT). As the global leader in construction and mining equipment, Caterpillar is perfectly positioned to benefit from the ongoing infrastructure boom. The company’s machinery is essential for a wide range of projects, from road construction to large-scale mining operations.
This direct alignment with industry demand has translated into impressive growth for the company lately. Last year, Caterpillar posted record revenues of $67.1 billion and adjusted EPS of $21.21, reflecting year-over-year increases of 13% and 53%, respectively. Although some growth slowdown is anticipated this year, with recent Q1 sales coming in somewhat flat, revenue and EPS remain near record levels and notably higher than their historical levels.
It’s also worth noting that Caterpillar has a solid history of dividend increases, having raised its dividend annually for 30 years. This consistent track record likely makes it an attractive option for investors seeking a name with a reliable capital return profile in the infrastructure sector. While the current yield of 1.8% may not be high, CAT stock is now trading at 14.3 times this year’s EPS, which I believe presents substantial potential for price appreciation.
On the date of publication, Nikolaos Sismanis 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.