Recently, the largest real estate conference in Europe, Expo Real, was held in Munich. It focused on the construction technologies of the future, and digitization was one of the main themes. So as you can imagine, some of the biggest tech stocks in the market are making large contributions to the industry.
Research suggests inaccurate, incomplete or otherwise flawed data cost the global construction industry $1.85 trillion in 2020.
“Organizations are adopting technology, but our study shows there is opportunity for them to gain even more from their investments,” Jay Bowman, research and analytics lead at FMI Corporation, told ForConstructionPros.com in late September. “Without data strategies in place, the construction industry is leaving significant amounts of money and opportunities for more positive project outcomes on the table.”
The construction industry has traditionally been a very hands-on, labor-intensive field with less focus on digitization. However, that’s changing with these seven tech stocks:
- Procore Technologies (NYSE:PCOR)
- Autodesk (NASDAQ:ADSK)
- Trimble (NASDAQ:TRMB)
- Oracle (NYSE:ORCL)
- Aveva Group (OTCMKTS:AVEVF)
- Bentley Systems (NASDAQ:BSY)
- Nemetschek (OTCMKTS:NEMTF)
Tech Stocks: Procore Technologies (PCOR)
The California provider of cloud-based construction software is one of the newer public companies on this list. Its initial public offering (IPO) in May sold 9.47 million shares of its stock at $67 per share. That’s two bucks above the high end of its pre-IPO pricing range. In the process, it raised $635 million, valuing the company at more than $8.5 billion.
Procore attempted to go public in early 2020, but put off the listing until this year because of Covid-19.
Due to ongoing labor shortages, the company’s construction software is experiencing strong demand. In August, it reported second-quarter 2021 sales growth of 27%, adding 481 new customers in the quarter.
It had an operating loss of $5.46 million compared to operating income of $4.89 million last year. However, for the first six months of 2021, its non-GAAP operating margin was a loss of 3%, identical to the same period a year earlier.
For all of 2021, Procore expects sales of at least $496 million and a non-GAAP operating margin loss of 6.5% at the midpoint of its guidance.
It’s important to remember that Procore is currently scaling its business. As a pure-play construction software company, the upside opportunities worldwide provide it with a long growth runway.
As money-losing companies go, Procore is one you can bank on to turn profitable soon.
All kinds of companies in the construction industry use Autodesk software to build projects, including architects, engineers and contractors. It delivers the industry standard for designing every aspect of a new build.
Unfortunately, in 2021, that hasn’t translated to its share price. Down nearly 4% year-t0-date (YTD), its five-year return has still managed to increase by more than 300%. That’s almost three times better than the S&P 500.
What’s keeping ADSK down so far in 2021?
It reported solid earnings at the end of August — sales rose 16% to $1.06 billion while net income was up 18% to $116 million. But investors were less than thrilled with its guidance for the third quarter. Its earnings per share estimate of $1.25 at the midpoint of its guidance is five cents off the consensus estimate.
Its stock dropped 10% on the news. It’s down 14% since its Q2 2021 earnings release.
However, the 22 analysts covering ADSK give it an “overweight” rating with a median target price of $355, providing a potential upside of 21.5% over the next 12 months.
Trading at 16x sales, ADSK stock is not cheap. However, compared to its 2020 price-to-sales (P/S) ratio of 18.6x, you’re getting a much better entry point. In the long term, I think you’ll be happy buying at current prices.
Tech Stocks: Trimble (TRMB)
Back in August, I selected 10 stocks to buy from Cathie Wood’s fleet of ETFs. Trimble was one of those stocks. It remains a top 10 holding in three of Ark Invest’s ETFs, including the 3D Printing ETF (BATS:PRNT).
Trimble’s Connected Construction platform provides contractors with all the digital tools they need to get projects completed on time and within budget.
“[I]n construction, our strategy is centered on the concept of a ‘constructible model’ that is at the center of our ‘Connected Construction’ solutions, which provides real-time, connected, and cohesive information environments for the design, build, and operational phases of construction projects,” states page six of Trimble’s 2020 10-K.
The platform provides solutions for data analytics, software for 3D conceptual designs, building information modeling (BIM) software and more.
In the second quarter, the company’s buildings and infrastructure segment, which incorporates Connected Construction, saw revenues increase by 24% to $365 million. That accounted for 39% of Trimble’s overall revenue. The segment delivered the most revenue of any part, as well as the highest operating profit.
With all the infrastructure spending expected in the next few years, Trimble is set up for success.
When I think of tech companies doing business in the construction industry, Oracle is not a name that comes to mind. However, the software giant is a big player in the industry.
Oracle’s construction and engineering products provide a decent revenue stream. Its offerings include Oracle Aconex, Oracle Primavera Cloud and several other software applications.
Here’s an example of what Oracle products can do for construction companies:
“One of the many tools that McShane wields to consistently deliver success for their clients is Oracle Textura Payment Management, a cloud-based solution that streamlines and automates processes for accurate billing, fast payment, and effective lien waiver management,” Oracle’s construction and engineering blog points out.
Oracle’s Textura Payment Management software saves McShane Construction a tremendous amount of time on lien waivers — a big time-waster in the construction industry.
I like to say that the best businesses make or save either time or money for customers. Oracle’s Textura Payment Management software does both.
As best as I can tell, Oracle’s construction and engineering business operates within its services sector. In fiscal 2021, services accounted for $3.02 billion. That’s approximately 8% of its overall revenue for the year.
That might not seem like a lot for a company that did more than $40 billion in revenue last year. However, it’s still more than several of the businesses on this list. It’s not to be overlooked.
Tech Stocks: Aveva Group (AVEVF)
Aveva Group is the first of two over-the-counter (OTC) stocks on my list. The U.K. company provides industrial software to various industries, including oil and gas, mining and paper.
In March, Aveva acquired OSIsoft for $5 billion. The acquisition strengthens the company’s ability to help industrial customers accelerate their digital transformation.
“We can deliver in the industrial sector end-to-end customer value and we do that with our portfolio of solutions and best-of-breed software. Our real goal here is to accelerate digital transformation in the Industrial sector, which is one of the last industries to go through this digital transformation at scale,” Aveva CEO Craig Hayman said in a March 2021 virtual press conference announcing the deal’s completion.
The combined entity’s annual revenue through March 31 was 1.2 billion British Pounds ($1.64 billion) with approximately 59% recurring. Its adjusted EBIT margin was 29.7%, 270 basis points higher than the margin a year earlier.
More importantly, Aveva’s ability to transform OSIsoft to its successful subscription model should result in ongoing growth in its recurring revenue.
Bentley Systems (BSY)
In April, the infrastructure software provider was one of my 10 picks of tech stocks to buy under $50. Up 12% since then, it no longer trades under $50.
I liked Bentley Systems because it’s a family-controlled company — the Bentley family holds approximately 65% of the votes. It also happens to be public and growing at a reasonable rate.
In the quarter ended June 30, the company’s annualized recurring revenue (ARR) was $882.4 million, 23% higher than a year earlier. If it delivers a repeat performance over the next few years, come August 2022, it will be announcing ARR over $1 billion for the first time in its history.
In June, Bentley acquired Seequent for $911 million in cash and 3.14 million shares of its Class B stock. The New Zealand-based company specializes in 3D modeling software. Its solutions help companies make better decisions about their infrastructure projects.
Bentley went public in September 2020 at $22 per share. At current prices, it’s up 161% since its IPO. Despite the gains, it’s not too late to win with BSY stock.
Tech Stocks: Nemetschek (NEMTF)
This German company has been on my radar since late August. I was doing an article about artificial intelligence stocks and liked what I saw, so I included Nemetschek in the piece. It is the second of two OTC tech stocks on this list.
This is a mid-cap stock, and in my experience, that’s where some of the best overall performances come from.
Now, if you’re not a fan of businesses that are focused on Europe, you might not like Nemetschek. This provider of software solutions for the construction industry generates almost a quarter of its revenue in Germany. Overall, Europe accounts for approximately 58%. Another 34% is from the Americas, and 9% is from the Asia/Pacific region.
Through the first half of 2021, its revenue grew by 12.5% while net income increased 48%. Based on its results so far in 2021, it expects sales to grow 13% for the entire year at the midpoint of its guidance, with an EBITDA margin of 31% at the midpoint.
In the TTM ended the second quarter, Nemetschek had an FCF of 176.8 million Euros ($205.4 million). It’s not cheap, but NEMTF stock has proven over the long haul that it delivers for shareholders.
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On the date of publication, Will Ashworth did not have (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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.