Infrastructure stocks remain quite popular among investors, especially with government initiatives in recent years poised to inject massive funding into the sector. Central to this boom is the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law (BIL), signed in November 2021. This landmark legislation has aimed to overhaul America’s aging infrastructure, targeting critical areas such as roads, bridges, water systems and broadband networks with significant federal investment.
As the IIJA unfolds, the momentum behind infrastructure stocks is vigorous. Companies operating in the space continue to benefit from the sustained flow of capital, which translates to both immediate and future revenue and earnings growth potential.
These three infrastructure stocks are ready to soar on the back of this trend. These companies operate in critical areas within the space, making them excellent candidates for investors looking to capitalize on today’s infrastructure landscape.
Caterpillar (CAT)
As the undisputed leader in the industry, Caterpillar (NYSE:CAT) is one of the most accessible stocks to pick. The ongoing infrastructure boom will benefit the company. As the top global construction and mining equipment manufacturer, Caterpillar is directly aligned with the growing demand for machinery.
This alignment has already translated into significant revenue and earnings growth for the company. Caterpillar’s revenues and adjusted earnings-per-share (EPS) came in at a record $67.1 billion and $21.21 last year. This marks year-over-year increases of 13% and 53%, respectively. This year, some growth slowdown is expected. Sales are already relatively flat in the company’s most recent Q1 report. Still, revenue and EPS are remain near record levels, generating massive profits for the company.
The company is likely to continue increasing its dividend rather rapidly as well. Caterpillar has a remarkable track record, having raised its dividend annually for three decades. This June, the dividend increased a noteworthy 8.5%. While the 1.6% yield isn’t high, Caterpillar’s stock, trading at 16X this year’s EPS, offers more potential through price appreciation than dividends. However, dividends will still contribute to overall returns.
Martin Marietta Materials (MLM)
The second stock on my list is Martin Marietta Materials (NYSE:MLM). We are a leading producer of construction aggregates and key building materials, such as crushed stone, sand and gravel. These materials are essential for major infrastructure projects, including road construction, bridge repairs and urban development.
As spending in the sector continues to surge, Martin Marietta stands to gain significantly from the increased demand for these fundamental resources. The company has experienced rapid growth in revenues and EPS, driven by heightened construction activity and strong industry conditions. These figures hit new records last year, landing at $6.78 billion and $19.38, up 10% and 41% year-over-year, respectively.
Despite its strong performance lately, the stock remains reasonably valued compared to industry peers at 26.8X this year’s expected EPS, given how strong its underlying growth has been. With consensus estimates toward sustained double-digit EPS growth over the medium term, Martin Marietta stock seems like an attractive buy for exposure in the space.
Jacobs Solutions (J)
The third and final infrastructure stock is Jacobs Solutions (NYSE:J), a leading provider of services in engineering, design and construction management. The company is deeply involved in infrastructure projects. Therefore, Jacobs is poised to gain notably from the rising demand for its all-in-one project solutions and consulting services as the infrastructure boom endures.
Recently, Jacobs has demonstrated impressive growth in its overall financials, reflecting the thriving infrastructure market. Its revenues and EPS hit new records of $16.35 billion and $5.33 last year, up 9.6% and 6.6% year-over-year, respectively. The company’s focus on high-value projects and extensive expertise in managing large-scale infrastructure developments suggest that solid top and bottom-line growth remains robust in the current environment.
In the meantime, Jacobs remains fairly valued, implying there is potential for additional appreciation. The stock is currently trading at 18.4X this year’s expected EPS. This is reasonable given Wall Street’s double-digit EPS growth lasts at least through 2028. Its $29.4 billion backlog offers strong forward-looking visibility and widens the overall margin of safety in Jacobs’ investment case.
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.
