In 2015, public construction spending in the United States was roughly $290 billion, similar to what it was in 2007. A significant boost in spending was anticipated with the passing of the Fixing America’s Surface Transportation (FAST) Act in December 2015, a $305 billion bill designed to improve transportation infrastructure. Additionally, 2016 presidential candidate Hillary Clinton had indicated that improving national infrastructure is a priority if she became president.
These five large-cap construction stocks were well positioned to benefit from the increased public spending.
Fluor Corporation (NYSE: FLR), founded in 1912, provides engineering, construction, and maintenance services. It also offers project management solutions. The company’s growth is likely to be supported by its backlog of projects. Its recent acquisition of Stork Holding B.V. and prominent position in the U.S. engineering and construction sector should continue to drive revenue. Fluor Corporation is attractively priced, with a price-earnings (P/E) ratio of 21.9, which compares to the engineering and construction industry average of 44.8. Investors had enjoyed a year-to-date (YTD) return of 9.76% as of Aug. 12, 2016. The stock offers a dividend yield of 1.63% and has a market cap of $7.2 billion. As of publication, it had been trading above its 200-day moving average since late March 2016.
Jacobs Engineering Group
Jacobs Engineering Group Inc. (NYSE: JEC) offers technical, professional and construction services for industrial, commercial and government clients. The Pasadena-based company posted 2016 fiscal third-quarter earnings per share (EPS) of 78 cents, beating analysts’ expectations of 74 cents per share. Jacobs Engineering Group uses minimal shareholder equity to finance its assets, with a debt-to-equity (D/E) ratio of 0.1. As of Aug. 12, 2016, the stock was trading at $53.51, just 4.26% below its 52-week high of $55.89. Jacobs Engineering Group’s stock had returned an impressive 27.56% YTD in 2016, outperforming the engineering and construction industry average YTD returns by roughly 12%. The stock had a market cap of $6.5 billion.
KBR Inc. (NYSE: KBR) is an engineering, procurement, construction and services company that supports the petrochemicals, government services and civil infrastructure sectors. The company completed the acquisition of government services company Wyle in July 2016, which expands KBR’s government segment with a backlog of over $1 billion in new projects, and reduces the company’s exposure to the energy sector. KBR’s stock was significantly cheaper than the stock of several of its peers, with a P/E ratio of 12.1, roughly four times less than the industry average. It had a $2.2 billion market cap and offers investors a dividend yield of 2.05%. KBR had returned -6.62% YTD as of Aug. 12, 2016.
AECOM (NYSE: ACM) designs, builds, finances and operates infrastructure assets for governments and businesses. The Los Angeles-based company was set to benefit if Hillary Clinton won the 2016 U.S. presidential election, as she intended to commit $275 billion to upgrading the nation’s roads, bridges and utility services. AECOM had a strong three-year average revenue growth of 29.8%, substantially higher than the 3.8% industry average. The stock had appreciated 15.02% YTD as of Aug. 12, 2016, and has a market cap of $5.3 billion. AECOM was trading at $34.54, only $1.66 below its 52-week high of $36.20.
EMCOR Group Inc. (NYSE: EME) provides mechanical and electrical construction services. The company services commercial, industrial, utility and institutional customers. EMCOR Group posted second-quarter 2016 revenue of $1.93 billion, beating Wall Street’s expectations of $1.77 billion. The stock has a market cap of $3.5 billion and pays investors a dividend yield of 0.56%. EMCOR Group was reasonably valued, with a P/E ratio of 19.3. As of Aug. 12, 2016, the stock was trading at $56.78, toward the top of its 52-week range between $40.98 and $57.04. The stock had returned an impressive 18.69% YTD return, eclipsing the Standard and Poor’s 500 index’s return by roughly 12%.