After a difficult year, the infrastructure sector has experienced a significant recovery and is expected to take advantage of growth opportunities next year. Anirban Basu, chief economist of Associated Builders and Contractors and CEO of consultancy firm Sage Policy Group, said that the construction outlook for 2022 looks positive.
In this context, Eaton Corporation plc (AND N) and Brookfield Infrastructure Corporation (BIPC) could be big winners thanks to improving their fundamentals.
However, after the Public rejection of President Biden’s Build Back Better legislation by a key senator, Joe Manchin, the outlook for the social spending plan looks uncertain. Therefore, we believe that the fundamentally weak infrastructure stocks Vulcan Materials Company (MVC) and Martin Marietta Materials, Inc. (MLM) are to be avoided now.
Click here to view our report on the infrastructure sector
Shares to buy:
Eaton Corporation plc (AND N)
Based in Dublin, Ireland, ETN is an energy management company that operates through Electric Global; Hydraulic; Aerospace; Vehicle; and the eMobility segments. The company’s segments offer electrical, industrial and residential products, pneumatic systems for commercial and military use. It also supplies powertrains, transmission systems and critical components for cars, light trucks and commercial vehicles.
In November, ETN partnered with the US Army Engineer Research and Development Center (ERDC), the Construction Engineering Research Laboratory (CERL), and the Department of Public Works in Fort Hood, Texas, to demonstrate the capability of a micro- network to operate the Robert Gray of Fort Hood. Army Airfield independent of the electricity grid. The ETN demonstration is an important step for the implementation of resilient infrastructure in military installations.
ETN’s net sales increased 8.8% year-on-year to $ 4.92 billion in the third quarter, ended September 30, 2021. The company’s net profit increased 40.9% from its value from a year ago to reach $ 630 million. Its EPS was up 41.4% from the previous year quarter to $ 1.57. Also, the company adjusted profit rose 28.9% year-on-year to $ 701 million.
Analysts expect ETN’s revenue for its 2021 fiscal year to be $ 19.8 billion, up 10.9% year-over-year. The company has an impressive history of profit surprises; it has beaten consensus EPS estimates in each of the past four quarters. ETN’s EPS is expected to increase by 55% in the current year. The stock has gained 43.6% year-to-date and 39.9% year-to-date.
ETN’s strong fundamentals are reflected in its POWR odds. The stock has an overall rating of B, which is equivalent to a purchase in our proprietary rating system. POWR ratings evaluate stocks based on 118 distinct factors, each with its own weight.
Additionally, the stock has a B rating for stability and quality. We also rated ETN for Growth, Momentum, Value and Sentiment. Click here to access all ETN ratings. ETN is ranked # 31 out of 78 stocks in the B-rated Industrial machinery industry.
Brookfield Infrastructure Corporation (BIPC)
BIPC owns and operates regulated natural gas transmission networks in Brazil. The New York-based company operates approximately 2,000 kilometers of natural gas transmission pipelines in Rio de Janeiro, Sao Paulo and Minas Gerais; and 3.6 million gas and electricity connections, and 1.5 million smart meters installed in the UK.
For the third quarter, ended September 30, 2021, BIPC revenue increased 33% year-on-year to $ 2.94 billion. The company’s net profit rose 262.2% from its value a year ago to $ 536 million. Its cash and cash equivalents rose 112.2% to $ 1.84 billion for the nine months ended September 30, 2021. And the share price jumped 1.7% in the five last trading days.
The BIPC’s POWR ratings reflect this promising outlook. The stock has an overall rating of B, which is equivalent to a purchase in our proprietary rating system. Additionally, the stock has a B rating for growth and quality.
In addition to the POWR ratings that I just highlighted, one can see the BIPC ratings for stability, value, momentum and sentiment. here. BIPC is ranked n Â° 1 out of 58 stocks in the Utilities – Domestic industry.
Actions to avoid:
Vulcan Materials Company (MVC)
VMC is a construction aggregates company based in Birmingham, Alabama, which operates through four segments: Aggregates; Asphalt; Concrete; and Calcium. The company has around 380 active aggregate facilities that sell aggregate used as ballast to build and maintain rail tracks.
During the third quarter, ended September 30, 2021, VMC’s total revenue increased 15.8% year-on-year to $ 1.52 billion. However, the company’s net profit fell 11.5% from last year’s value to $ 176.9 million. In addition, its EPS was down 11.9% from the previous year quarter to $ 1.33.
VMC’s POWR ratings dovetail with this grim outlook. The stock has an F rating for value and a C rating for stability and quality.
Click here to see additional POWR ratings for VMC (Momentum, Growth, and Feeling). The stock is ranked # 44 out of 55 stocks in the B rating Industrial – Building materials industry.
Martin Marietta Materials, Inc. (MLM)
MLM is an American supplier of building materials with operations in 30 states. the Raleigh, based in NC the company offers crushed stone, sand and gravel products; ready-mixed concrete and asphalt; paving products and services; and Portland and Specialty Cement. In addition, the Company’s Magnesia Specialties business includes magnesia and dolomitic lime chemicals business.
In the third quarter, ended September 30, 2021, MLM’s total revenue grew 17.9% year-on-year to $ 1.56 billion. The company’s operating profit declined 10.9% from last year’s value to $ 356.9 million. Its interest expense increased 54.4% from the prior year quarter to $ 44.3 million. In addition, the company’s EPS fell 13.6% year-over-year to $ 4.07. Its EPS is expected to decline 1% in the current quarter.
MLM’s poor outlook is reflected in its POWR ratings. The stock has a D rating for value and a C rating for stability and sentiment. Click here to access additional MLM reviews (Growth, Quality and Momentum). MLM is ranked # 39 in the same industry.
Click here to view our report on the infrastructure sector
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ETN shares were trading at $ 169.38 per share on Monday morning, up $ 1.34 (+ 0.80%). Year-to-date ETN has gained 43.78%, compared to a 28.76% increase in the benchmark S&P 500 over the same period.
Priyanka is an avid investment analyst and financial journalist. After get a master’s degree in economics, her interest in financial markets motivated her to start her career in investment research. Following…