President Biden’s nearly $2 trillion Build Back Better plan was expected to revamp the country’s traditional infrastructure. Therefore, the plan would have created immense opportunities for some of the country’s biggest infrastructure companies.

However, Democratic Sen. Joe Manchin recently said that he could not back his party’s  Build Back Better Act, making the plan’s prospects uncertain. With concerns that certain spending bill provisions could exacerbate already high inflation, Manchin has long been a holdout on the legislation. Following this decision, Goldman Sachs cut its U.S. growth forecast. Furthermore, the chief economist of Goldman Sachs and the team stated that “We had already expected a negative fiscal impulse for 2022 as a result of the fading support from COVID-relief legislation enacted in 2020 and 2021, and without BBB enactment, this fiscal impulse will become somewhat more negative than we had expected.”

Because Manchin’s decision could eliminate the hoped-for $2 trillion spending to build highways, roads, bridges, and other infrastructures, we think it could be wise to avoid fundamentally weak infrastructure stocks Nucor Corporation (NUE), Vulcan Materials Company (VMC), Martin Marietta Materials, Inc. (MLM) and Eagle Materials Inc. (EXP).

Click here to check out our Infrastructure Sector Report

Nucor Corporation (NUE)

Incorporated in 1958, NUE in Charlotte, N.C. is a diversified steel and steel products company that operates through Steel Mills; Steel Products; and Raw Materials segments. The company produces direct reduced iron (DRI), hot-rolled, cold-rolled, and galvanized sheet steel and processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, and hot briquetted iron (HBI).

This month, NUE acquired a majority position in California Steel Industries, Inc. (CSI) by purchasing a 50% equity interest from a subsidiary of Vale S.A. (Vale). NUE will pay a $400 million cash purchase price to Vale for its 50% interest. But although this acquisition may expand NUE’s geographic reach in sheet steel, it could negatively impact its cash balance in the near term.

NUE’s net sales increased 109.3% year-over-year to $10.31 billion in the third quarter, ended October 2, 2021. However, the company’s marketing and other expenses grew 218% from their year-ago value to $526.35 million. Also, its cash and cash equivalents declined 33.2%  to $1.76 billion as of October 2, 2021 from $2.64 billion as of December 31, 2020..

Analysts expect NUE’s revenue to decrease 5.1% year-over-year to $34.7 billion in its fiscal 2022. The company’s EPS is expected to decline 27.8% next year. The stock has retreated 1.5% in price over the past month.

Vulcan Materials Company (VMC)

VMC is a construction aggregate company that operates through four segments: Aggregates; Asphalt; Concrete; and Calcium. The Birmingham, Ala.-based company has approximately 380 active aggregates facilities that sell aggregates used as ballast to construct and maintain railroad tracks.

During the third quarter, ended September 30, 2021, VMC’s total revenues increased 15.8% year-over-year to $1.52 billion. However, the company’s net earnings decreased 11.5% from their year-ago value to $176.9 million. Also, its EPS declined 11.9% from the prior-year quarter to $1.33. VMC’s shares have lost 3.6% over the past five trading days.

Martin Marietta Materials, Inc. (MLM)

MLM is an American-based building materials supplier company that operates in 30 states. The Raleigh, N.C. 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-based chemicals and dolomitic lime businesses.

During the third quarter, ended September 30, 2021, MLM’s total revenues increased 17.9% year-over-year to $1.56 billion. The company’s earnings from operations decreased 10.9% from their year-ago value to $356.9 million. Its interest expense rose 54.4% from the prior-year quarter to $44.3 million. Also, the company’s EPS declined 13.6% year-over-year to $4.07.

The company’s EPS is expected to decline 1% in the current quarter. MLM’s stock price has declined 4.2% over the past five trading days.

Eagle Materials Inc. (EXP)

As a supplier of heavy construction materials and light building materials in the United States, Dallas, Tex.-based EXP, operates in five segments: Cement; Concrete and Aggregates; Gypsum Wallboard; Recycled Paperboard; and Oil and Gas Proppants. The company runs eight modern cement plants, one slag grinding facility, 29 cement distribution terminals, approximately five gypsum wallboard plants, and a recycled paperboard mill.

During its fiscal second quarter, ended September 30, 2021, EXP’s revenue increased 13.9% year-over-year to $509.69 million. However, the company’s interest expense came in at $12.27 million. Its cash and cash equivalents declined 77.5% from the year-ago value to $45.21 million. And EXP’s shares have declined  4.3% in price  over the past month.

Click here to check out our Infrastructure Sector Report

NUE shares were trading at $113.05 per share on Tuesday morning, up $1.92 (+1.73%). Year-to-date, NUE has gained 115.40%, versus a 23.85% rise in the benchmark S&P 500 index during the same period.

About the Author: Priyanka Mandal

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...

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