Now that Joe Biden appears to have won the presidency, it is time to renew the focus on improving the country’s infrastructure. Infrastructure desperately needs to be upgraded and renewed across the country. It’s also one rare area of bipartisan agreement.
Savvy investors understand now is the time to scoop up infrastructure stocks. Many of these stocks have underperformed the last couple of years so combine attractive growth and value properties.
Below, we provide a look at four infrastructure stocks likely to boom during Biden’s term: United Rentals (URI), Nucor Corporation (NUE), Brookfield Infrastructure Partners (BIP), and Aecom (ACM).
United Rentals (URI)All sorts of equipment are necessary to rebuild and enhance infrastructure. URI rents more than 20,000 types of such equipment including heavy machinery and hand tools. URI’s products are rented to individuals as well as construction companies and industrial businesses. In fact, municipalities and utility companies also use URI equipment.
The URI POWR Ratings reveal the stock has “A” grades in the Peer Grade, Trade Grade, and Buy & Hold Grade components. URI is ranked first of 35 publicly traded companies in the Industrial – Services category. URI has a low forward P/E ratio of 14, meaning the stock is likely undervalued at $230. Though URI’s stock dipped earlier this year, the company’s revenue is on the upswing. Furthermore, URI’s quarterly free cash flow is more than $815 million.
Look for URI’s market share to increase from the current 13% level and the stock to move toward $250 in anticipation of infrastructure legislation being passed while Biden is in office.
Nucor Corporation (NUE)
If the country’s infrastructure is going to be partially rebuilt or at least improved, NUE’s steel will play a big part in the work. NUE produces structural steel including joists, bars, and deck. Furthermore, the company also makes direct reduced iron used within its steel mills. All in all, NUE has more than 120 facilities, mainly located in North America.
The POWR Ratings reveal NUE has “A” grades in the Buy & Hold Grade and Trade Grade components. NUE is ranked 6th of 28 stocks in the Steel industry. NUE’s forward P/E ratio is under 19, indicating it has some room for upward movement. Furthermore, NUE has not yet made its way back to its pre-coronavirus price level of $55.
NUE is somewhat unique compared to other steel industry players in that it operates comparably small plants, providing products with elevated margins. The bottom line is NUE will benefit from the renewed focus on rebuilding and repairing the country’s airports, bridges, roads, dams, etc.
Brookfield Infrastructure Partners (BIP)
Infrastructure, timberlands, and electricity transmission systems will be central to the country’s rebuild. BIP operates in each of these areas. The stock has “A” grades in the Buy & Hold Grade, Peer Grade, and Trade Grade POWR Rating components. Furthermore, BIP is ranked first of 18 stocks in the MLPs – Other category.
Of the nine analysts who have studied BIP, seven rates it as a “Buy”, two rates it as a “Hold” and none advise selling. BIP is likely undervalued at its current trading price of $52 as its forward P/E ratio is a mere 16.60.
BIP’s cash flow has stabilized even amidst a punishing recession. The completion of asset sales combined with the company’s capital recycling program should help BIP move even higher in the year to come.
When it comes to building the infrastructure of the future, ACM will be front and center. ACM plans infrastructure products, provides consulting services, engineers, and designs all sorts of infrastructure projects. ACM builds everything from the company’s unique hyperloop to mass transit systems of other sorts, bridges, highways, and airports.
The POWR Ratings show ACM has “A” grades in the Peer Grade, Trade Grade, and Buy & Hold Grade components. ACM is ranked 10th of 35 publicly traded companies in the Industrial – Services space. The top analysts predict a bright future for ACM, setting an average price target of $56.75, meaning the stock is likely to increase by more than 8%.
Now that Biden is in office, ACM is poised to break through its pre-coronavirus high of $52, possibly hitting $55 to $60 in the months ahead.
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URI shares were trading at $232.05 per share on Wednesday morning, down $5.86 (-2.46%). Year-to-date, URI has gained 39.14%, versus a 14.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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