On January 14, then-U.S. President-elect Joe Biden launched the framework of his first major proposal — a $1.9 trillion “American Rescue Plan.” Though this plan has no funding related to infrastructure or construction, many observers and infrastructure players are hopeful that Biden will launch his second key policy proposal, his “Build Back Better Recovery Plan”, next month. Previously, Biden asserted that  “It’s time to stop talking about infrastructure and to finally start building an infrastructure so we can be more competitive.” The Democratic Party’s control of the U.S. Senate gives Biden’s plans a realistic shot at passage.

Many agree that U.S. infrastructure, broadly,  is in dire need of  a major overhaul. Construction in general in the country has slowed markedly over the last year due to the COVID-19 pandemic. A recent report by the American Society of Civil Engineers (ASCE) states that the investment gap between projected needs and likely investment in critical infrastructure systems in the U.S. is more than $2.6 trillion through 2029 and more than $5.6 trillion through 2039. Many agree that increased spending on infrastructure is overdue not only for public utility it would deliver, but also as a stimulus to a still-shaky economy, boosting employment growth in the U.S. and global competitiveness.

We expect Rockwell Automation, Inc. (ROK), Vulcan Materials Company (VMC), AECOM (ACM), and Fluor Corporation (FLR) to be major beneficiaries of Biden’s massive infrastructure proposal. These stocks could see significant upside this year with the announcement of the plan in February.

Rockwell Automation, Inc. (ROK)

ROK is a global leader in industrial automation and  digital transformation solutions. It operates through its two segments–Architecture & Software, and Control Products & Solutions. The company caters to various industries including  automotive, oil &gas, semiconductor, logistics, warehousing, food and beverage, and life sciences.

ROK this month completed the acquisition of Fiix Inc., a Canadian AI-enabled computerized maintenance management system (CMMS) company. Fiix’s cloud-native software empowers companies to schedule, organize and track equipment maintenance. The acquisition  should  boost ROK’s software strategy and enhance the capabilities of its  Lifecycle Services business. Fiix will be reported as part of Rockwell Automation’s Software & Control operating segment.

During the fourth quarter, ended September 30, 2020, ROK’s  sales fell 9.3% year-over-year to $1.6 billion. Its organic sales for the quarter declined 12.1%. Meanwhile, its EPS climbed to $2.25 from $0.07 posted in the same period last year due to fair-value adjustments recognized in the fourth quarter of fiscal 2020 and 2019 related to PTC adjustments.

The Street estimates revenue for the quarter ended December 31, 2020 to be $1.6 billion, representing  a 3.8% decline year-over-year. Meanwhile, EPS is likely to rise at the rate of 11.6% per annum over the next five years.

ROK has gained  32.7% over the past year to close yesterday’s trading session at $267.7. The stock climbed 18% over the past six months.

How does ROK stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

B for Industry Rank

A for Overall POWR Rating

The stock is also ranked #8 of 88 stocks in the Industrial – Machinery industry.

Vulcan Materials Company (VMC)

VMC is the one of the largest manufacturers and suppliers of construction materials in the U.S. The four segments through which VMC operates are Aggregates, Asphalt, Concrete, and Calcium. VMC is involved in the construction of highways, streets, housing, commercial and industrial facilities. It also  offers asphalt mix and concrete across the United States.

During the third quarter, ended September 30, 2020, VMC’s revenue declined  7.7% year-over-year to $1.3 billion. The company’s EPS declined to $1.50 from $1.62 posted in the prior year period. Tom Hill,  VMC’s chairman and CEO, stated, “Continued recovery in these fundamentals would point to construction activity stabilizing over the course of 2021.”

Analysts expect revenue for the quarter ended December 31, 2020 to decline  2.8% year-over-year to $1.2 billion. Meanwhile, the company’s EPS is likely to expand at a rate of 8.4% per annum over the next five years.

VMC ended yesterday’s trading session at $158.86, surging 12.1% over the past year. Over the past six months, the stock has surged 25.1%.

VMC is rated “Strong Buy” in our POWR Ratings with an “A” for Trade Grade, Buy & Hold Grade, and a “B” for Peer Grade and Industry Rank. It is currently ranked #2 of 57 stocks in the Industrial – Building Materials industry.

AECOM (ACM)

ACM offers professional services regarding  program and construction management in the Americas, Europe, Africa, the Middle East and the Asia Pacific. Americas, International and AECOM Capital are the three segments through which it operates. ACM also serves government clients through its planning, consulting, engineering, and construction management.

Earlier this month, ACM completed the sale of its civil construction business to affiliates of Oroco Capital. This, along with the  sale of its power construction business in October, means ACM has now substantially exited from all  its risky construction businesses.

ACM’s revenue for the fourth quarter, ended September 30, 2020, declined  year-over-year to $13.2 billion. However, its adjusted EBITDA rose 14% to $746 million, led by strength in its  Professional Services business. The company’s  business backlog remains at near-record levels at $41.2 billion. In addition, its contracted backlog climbed 12% year-over-year. Its loss per share expanded to $2.95 from $1.44 posted in the same period last year.

The consensus revenue estimate for the year ended December 31, 2020 is $3.2 billion, representing  a 0.7% year-over-year decline. ACM’s EPS for the period is expected to rise 23.9% to $0.57.

ACM ended yesterday’s trading session at $53.48, climbing 7.4% over the past year. During the past six months, the stock has risen 43.8%.

ACM’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, and a “B” for Peer Grade. It is currently ranked #10 of 84 stocks in the Industrial – Services industry.

Fluor Corporation (FLR)

FLR offers engineering, procurement, construction, modularization and fabrication services globally. Energy & Chemicals, Mining & Industrial, Infrastructure & Power, Government, and Diversified Services are the six segments through which the company operates. FLR also offers support services to the U.S. intelligence community, including the U.S. Department of Energy, National Nuclear Security Administration, and the U.S. Department of Homeland Security.

On January 11, FLR announced that  beginning in the first quarter of 2021, FLR will conduct its operations in three business segments: Energy Solutions, Urban Solutions and Mission Solutions. The company has also established two newly consolidated functional organizations–Project Execution and Corporate Development and Sustainability. FLR has also initiated plans to divest its maintenance service, Stork.

During the third quarter ended September 30, 2020, FLR’s revenue fell  17.6% year-over-year to $3.8 billion. The Government segment was its only major segment to see an uptick in revenue. Its EPS for the quarter was $0.14 compared to loss per share of $5.30 posted in the same period last year.

Analysts expect revenue for the quarter ended December 31, 2020 to rise 0.8% year-over-year to $3.8 billion. Its EPS is likely to grow 181% to $0.17.

FLR ended yesterday’s trading session at $20.74, gaining 3% over the past year. During the past six months, the stock had advanced  67%.

FLR is rated “Strong Buy” in  the POWR Ratings. It has an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Peer Grade and Industry Rank. It is currently ranked #14 of 57 stocks in the Industrial – Building Materials Industry.

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ROK shares were trading at $264.62 per share on Friday morning, down $3.08 (-1.15%). Year-to-date, ROK has gained 5.51%, versus a 2.27% rise in the benchmark S&P 500 index during the same period.

About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...

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