Nationwide infrastructure in the United States is expected to be reshaped by President Biden’s proposed $2 trillion-plus spending plan, given his ambitious desire to upgrade the broad swaths of the country’s infrastructure and pave the way for relatively new industries, such as electric vehicles and clean energy, to expand their operations.
The construction materials market is expected to grow at a 15.7% CAGR over the next four years to hit $1.12 trillion by 2025. Investor interest in the infrastructure space is evidenced by the Global X Funds Global X U.S. Infrastructure Development ETF’s (PAVE) 96.1% returns compared to the S&P 500 Trust ETF’s (SPY) 47.9% gains over the period.
Given this backdrop, we think it is wise to invest in fundamentally sound infrastructure stocks Tetra Tech, Inc. (TTEK) and Columbus McKinnon Corporation (CMCO) that are poised to deliver significant returns in the coming months.
Tetra Tech, Inc. (TTEK)
TTEK is a provider of consulting, engineering, program management, construction management, and technical services. The company operates through three segments—its Government Services Group (GSG), Commercial and International Services Group (CIG), and Remediation and Construction Management (RCM). It supports commercial and government clients and is focused on water, environment, infrastructure, resource management, and energy.
On April 13, the U.S. Army Corps of Engineers (USACE) awarded TTEK a six-year, $36 million contract to assess and manage flood risks, reduce coastal erosion, and restore ecosystems. Through predictive modeling and advanced analytics, TTEK hopes to design innovative structural and non-structural resilient infrastructure solutions to reduce impacts from storm events and rising sea levels.
TEK acquired IBRA-RMAC Automation Systems, Inc., an industry leader in water systems instrumentation and digital transformation consulting services for water infrastructure, on April 8. With this acquisition, TTEK hopes to further expand its digital water consulting capabilities with state-of-the-art instrumentation, digital automation, and advanced data analytics services for its customers.
The company’s revenue has increased 2.8% year-over-year to $754.76 million for the fiscal 2021 second quarter, ended March 28, 2021. TTEK’s gross profit has increased 16% year-over-year to $112.48 million. Its operating income came in at $60.81 million, which represents a 27.9% improvement year-over-year. Also, its net income was $45.52 million for the quarter, up 25.1% year-over-year. TTEK’s EPS also increased 25.8% year-over-year to $0.83.
A $0.98 consensus EPS estimate for the quarter ending September 30, represents an improvement of 7.7% year-over-year. TTEK surpassed the consensus EPS estimates in each of the trailing four quarters. The $645.63 consensus revenue estimate for the same quarter represents a 9.5% gain on a year-over-year basis. Analysts expect the stock’s EPS to grow at a 15% rate per annum over the next five years.
The stock has gained 76.4% over the past year and 40.2% over the past nine months. TTEK closed yesterday’s trading session at $126.96.
TTEK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Momentum, Stability, and Quality. We have also rated TTEK for Growth, Value, and Sentiment. Click here to access all TTEK’s ratings.
TTEK’s is ranked #6 of 17 stocks in the Waste Disposal industry.
Columbus McKinnon Corporation (CMCO)
CMCO designs, manufactures, and markets intelligent motion solutions to ergonomically move, lift, position, and secure materials worldwide. It offers material handling equipment, crane systems, rigging equipment and power fluid transfer technology. The company offers its products to end users directly, as well as through distributors, private companies, engineering procurement contractors, crane builders, integrators of factory production systems, and original equipment manufacturers.
On April 29,CMCO priced a public offering of 3.75 million shares of its common stock at $48 per share, for $180 million in gross proceeds. The company intends to use the offering’s net proceeds to repay in part outstanding borrowings under its first term loan facility.
On April 7, CMCO completed its acquisition of Dorner Manufacturing Corporation, a privately held company providing conveyor automation solutions, for an all-cash purchase price of $485 million. Through this acquisition, CMCO hopes to advance its growth objectives and strategy with Dorner’s platform in the specialty conveying space.
For its fiscal year 2021 third quarter, ended December 31, CMCO’s net sales increased 5.5% sequentially to $166.55 million. Its $71.95 million in net cash was generated from operating activities, which represented an improvement of 2.4% year-over-year. The company had cash and cash equivalents of $187.88 million at the end of the period, up 63.8%.
Analysts expect CMCO’s EPS to be $0.51 for the current quarter, ending June 30, 2021, which represents a 628.6% improvement year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Also, the consensus revenue is estimated to be $805.79 million for its fiscal year 2022, representing a 25.5% rise year-over-year. CMCO’s EPS is expected to grow at a 20% rate per annum over the next five years. The stock has gained 93.1% over the past year to close yesterday’s trading session at $50.54.
CMCO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value and Quality. Click here to see the additional ratings for CMCO (Growth, Stability, Momentum, and Sentiment).
CMCO is ranked #10 of 86 stocks in the A-rated Industrial – Machinery industry.
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TTEK shares were unchanged in after-hours trading Tuesday. Year-to-date, TTEK has gained 7.07%, versus a 11.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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