Buy 2 infrastructure stocks in January, avoid 2

After a challenging year, the infrastructure industry has recovered significantly and is expected to benefit from growth opportunities in the next year. Anirban Basu, chief economist for Associated Builders and Contractors and CEO of consulting firm Sage Policy Group, said: the construction prospects for 2022 look positive.

With this in mind, Eaton Corporation plc (ETN) and Brookfield Infrastructure Corporation (BIPC) could be big winners given their improving fundamentals.

But after that public rejection of President Biden’s Build Back Better legislation from a key Senator, Joe Manchin, the outlook for the welfare spending plan looks uncertain. Hence, we believe fundamentally weak infrastructure stocks Vulcan Materials Company (VMC) and Martin Marietta Materials, Inc. (MLM) are best avoided now.

Click here to read our Infrastructure Sector Report

Shares to buy:

Eaton Corporation plc (ETN)

ETN, based in Dublin, Ireland, is a power management company operating through Electric Global. Hydraulics; Aerospace; Vehicle; and eMobility segments. The company’s segments offer electrical, industrial and household products, as well as pneumatic systems for commercial and military purposes. It is also active in the supply of powertrains, powertrain systems and critical components for passenger cars, light trucks and commercial vehicles.

In November, ETN partnered with the U.S. Army Engineer Research and Development Center (ERDC), Construction Engineering Research Laboratory (CERL), and the Department of Public Works at Fort Hood, Texas to test the ability of a microgrid to operate Robert Gray at Fort Hood to demonstrate Army Airfield being independent of the utility grid. The ETN demonstration is an important milestone for the implementation of resilient infrastructure in military facilities.

ETN net sales increased 8.8% year over year to $ 4.92 billion for the third quarter ended September 30, 2021. The company’s net income increased 40.9% year over year to $ 630 million. Earnings per share rose 41.4% from the year-ago quarter to $ 1.57. The company too adjusted result increased 28.9% year over year to $ 701 million.

Analysts expect ETN revenue of $ 19.8 billion in fiscal 2021, a year-over-year growth of 10.9%. The company has an impressive track record with surprises; it outperformed consensus EPS estimates for each of the past four quarters. ETN’s earnings per share are expected to increase by 55% this year. The share price rose 43.6% last year and 39.9% since the beginning of the year.

ETN’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which equates to a buy in our proprietary rating system. The POWR ratings rate stocks on the basis of 118 different factors, each with its own weighting.

The share also has a B rating for stability and quality. We have also ranked ETN for growth, momentum, value and sentiment. Click here to access all ETN reviews. ETN ranks 31st out of 78 B-rated stocks Industrial machines Industry.

Brookfield Infrastructure Corporation (BIPC)

BIPC owns and operates regulated natural gas transportation systems in Brazil. The New York City-based company operates around 2,000 kilometers of natural gas pipelines in Rio de Janeiro, Sao Paulo and Minas Gerais; and 3.6 million gas and electricity connections and 1.5 million smart meters installed in the UK.

For the third quarter that ended September 30, 2021, BIPC revenue rose 33% year over year to $ 2.94 billion. The company’s net income increased 262.2% year over year to $ 536 million. Cash and cash equivalents increased 112.2% to $ 1.84 billion for the nine months ended September 30, 2021. The share price has risen 1.7% in the last five trading days.

BIPC’s POWR ratings reflect this promising outlook. The stock has an overall rating of B, which equates to a buy in our proprietary rating system. The share also has a B rating for growth and quality.

In addition to the POWR ratings just highlighted, the BIPC ratings for stability, value, momentum and sentiment can be seen here. BIPC ranks # 1 out of 58 stocks in the Utilities – Domestic Industry.

Stocks to Avoid:

Volcanic Materials Company (VMC)

VMC is a construction aggregates company based in Birmingham, Alaska, which operates in four segments: aggregates; Asphalt; Concrete; and calcium. The company has approximately 380 active aggregate plants that sell aggregates used as ballast for the construction and maintenance of railroad tracks.

For the third quarter that ended September 30, 2021, total VMC revenue rose 15.8% year over year to $ 1.52 billion. However, the company’s net income declined 11.5% year over year to $ 176.9 million. Also, earnings per share fell 11.9% year over year to $ 1.33.

VMC’s POWR ratings are in line with this dire outlook. The stock has an F rating for value and a C rating for stability and quality.

Click here to view the additional POWR ratings for VMC (Momentum, Growth and Sentiment). The share ranks 44th out of 55 shares in the B rating Industry – building materials Industry.

Martin Marietta Materials, Inc. (MLM)

MLM is a US-based building materials supplier that operates in 30 states. the Raleigh, NC based The company offers crushed stone, sand and gravel products; Ready-mixed concrete and asphalt; Plaster products and services; and portland and specialty cement. In addition, the company’s magnesia specialty business includes magnesia-based chemicals and dolomite lime.

In the third quarter that ended September 30, 2021, total MLM revenue rose 17.9% year over year to $ 1.56 billion. The company’s operating profit decreased 10.9% year over year to $ 356.9 million. Interest expense increased 54.4% from the year-ago quarter to $ 44.3 million. Also, the company’s earnings per share fell 13.6% year over year to $ 4.07. Earnings per share are expected to decline 1% in the current quarter.

MLM’s poor outlook is reflected in its POWR ratings. The stock has a D rating for value and a C rating for stability and sentiment. Click here to access the additional MLM reviews (growth, quality and dynamism). MLM ranks 39th in the same industry.

Click here to read our Infrastructure Sector Report

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ETN shares traded at $ 169.38 per share on Monday morning, up $ 1.34 (+ 0.80%). Since the beginning of the year, ETN has gained 43.78%, compared to 28.76% in the benchmark index S&P 500 in the same period.

Priyanka is a passionate investment analyst and financial journalist. To do a master’s degree in economics, Her interest in the financial markets motivated her to start her career in investment research. More…


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