| The research consultancy Infrastructure USA reports that several states and local jurisdictions are now reconstructing or proposing to reconstruct highways and bridges without the help of federal grants. Another state-level trend is the authorization of public-private partnerships for transportation projects. What's more, public works spending is booming internationally, especially in the form of China's "Belt and Road" initiative. Infrastructure stocks, defined... Publicly traded infrastructure companies are responsible for developing the basic facilities and systems of a country, city or region. These companies are vital for economic development and growth; they build and repair the "backbones" of modern cities. Infrastructure is a single broad term used for all physical systems, including sewage, water, and electrical systems, communications, and transportation. Some infrastructure companies even own entire shipping ports or the very bridges and roads that we drive on. Infrastructure also encompasses waste disposal, educational facilities, and public health delivery. Infrastructure companies are tapped into basic human needs that will always exist, regardless of economic ups and downs or the gyrations of the stock market. As such, they make prudent long-term investments. Read This Story: Four Investment Themes for a Biden Presidency The aforementioned trends are providing powerful tailwinds for two infrastructure stocks in particular: - Fluor (NYSE: FLR): A construction and engineering colossus that's well connected to public works departments around the world.
- AECOM (NYSE: ACM): Logistical consultant, architect and engineer for a wide variety of infrastructure projects.
How do you determine what qualifies as a top infrastructure stock? As with any stock market investment, infrastructure equities worth buying must demonstrate growth in corporate earnings and revenues, combined with reasonable valuations. Infrastructure firms must grapple with the enormous capital costs associated with the building and maintenance of complex structures. Billions of dollars in heavy equipment and a well-paid workforce are on the line, requiring solid balance sheets and plenty of cash on hand. As such, quality infrastructure firms generate some of the steadiest cash flows of any industry. Investors looking for reliable growth are well-served by looking into the sector. Each of my two recommendations meet these vital criteria. Let's examine the infrastructure stocks with the best growth potential for 2021 and beyond. Fluor With a market cap of $2.3 billion, Texas-based Fluor provides engineering, construction and project management services around the globe. The company operates in five segments: Oil & Gas; Industrial & Infrastructure; Government; Global Services; and Power. Fluor has its fingers in many mammoth transportation projects, with a revenue mix that provides a measure of stability. Fluor also is a major player in nuclear power, which is enjoying resurgence due to concerns over climate change and fossil fuel pollution. Fluor's forward 12-month price-to-earnings ratio (FPE) of 29.5 is roughly in line with its peers. It's FPE isn't dramatically out of whack with the S&P 500's FPE of 22.22. The company has ample cash on hand (most recent quarter) of $1.96 billion. The stock is a bargain compared to its projected earnings growth trajectory. The average analyst expectation is that Fluor's year-over-year earnings growth will reach 147.40% in the current quarter, 50% next quarter, 126.80% in the current year, and 116.10% next year. AECOM California-based AECOM is an acronym for Architecture, Engineering, Consulting, Operations and Maintenance, an apt summary of its many interests. With a market cap of $9.2 billion, AECOM is a global provider of planning, consulting, engineering, architectural, and construction management services for highways, bridges, airports, mass transit systems, government and commercial buildings, water and wastewater facilities, and power transmission. AECOM continues to benefit from a ballot initiative passed November 2016 in its home state of California that calls for a half-cent sales tax increase to plow $120 billion into rail and bus expansions over the next few decades, in addition to street upgrades and pedestrian walkway improvements. |
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