In many ways, this is an excellent time for American engineering, procurement and construction (EPC) stocks. EPC firms manage large construction projects, such as infrastructure work, industrial facilities and power plants. Of course, Washington is currently doling out large amounts of money to states for use in subsidizing infrastructure projects, while large renewable energy facilities are being built. Moreover, the federal government is also subsidizing the construction of computer chip factories in the U.S.
Given these points, it’s not at all surprising that, according to the U.S. Federal Reserve, the amount of money spent monthly on building factories soared from $75.85 billion in February 2021 to $222.875 billion in February 2024. Meanwhile, the demand for electricity is expected to soar thanks to the EV and AI revolutions. Here are three EPC stocks that are benefiting tremendously from these trends and are likely to continue to do so for many years to come.
Quanta Services (PWR)
Quanta Services (NYSE:PWR) builds electrical power stations, facilities for renewable energy and the transmission of natural gas. As a result, the firm is exceptionally well-positioned to get a lift both from increased use of renewable power and surges in the overall demand for electricity.
Indeed, Quanta is already benefiting a great deal from the renewable energy boom as it won a deal last year. PWR will provide comprehensive infrastructure solutions for the SunZia Transmission and SunZia Wind projects. According to Quanta, the initiatives are cumulatively the largest clean energy infrastructure projects in United States history.
Also showing that Quanta is benefiting from multiple, positive catalysts, the firm’s revenue climbed 31% last quarter year-over-year (YOY) to $5.78 billion. Meanwhile, its consolidated operating income rose 5.6% year-over-year to $322.5 million.
Wall Street has become more upbeat on PWR in recent months, as investment bank Oppenheimer recommended buying the shares in March. And, Citi followed suit on April 7.
AECOM (ACM)
AECOM (NYSE:ACM) is a large EPC company that focuses on offering professional infrastructure consulting services.
According to Building Design + Construction, AECOM is the world’s eighteenth largest data center construction company, based on overall 2022 revenue. According to one estimate, the global annual market for data center construction will increase at a compound annual growth rate of 7.1% between 2022 and 2030. In 2030, the revenue from such projects is slated to come in at $201.4 billion.
On the firm’s fiscal Q1 earnings call, CEO Troy Rudd noted that its water and transportation markets were especially strong. AECOM’s overall Q1 results were favorable as its operating income jumped 17% YOY to $223 million. Meanwhile its sales soared 15% YOY to $3.9 billion.
Jacobs Solutions (J)
Jacobs Solutions (NYSE:J) is an EPC company that appears to have an inside track on obtaining major government contracts.
Last month, Jacobs was named as the major subcontractor for a $249 million contract. It will see the firm provide support services at a U.S. Air Force base. And earlier this month, the firm was chosen by Miami-Dade County to design upgrades for the county’s three wastewater treatment plants. Finally, Jacobs was selected in partnership with AECOM to provide program and construction management services for Amtrak.
Given Jacobs’ proclivity for obtaining large government deals, I expect it to flourish in the coming years. Especially, as Washington continues to spend a great deal of money on infrastructure projects. In light of these points, I view J as one of the best EPC stocks to buy now.
On the date of publication, Larry Ramer 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
