These 3 Companies Are Positioned To Benefit From The Federal Infrastructure Plan

Although concerns persist about implementing a federal infrastructure plan, healthy macro trends, better visibility from the FAST Act and improved funding environment bodes well for the industry according to a new report.

“An uptick in materials demand points to looming improvement for transportation construction activity as tracked by the US Census,” said analyst Bobby Burlesonof Canaccord Genuity.

According to Burleson, Granite Construction Inc. GVA, Sterling Construction Company, Inc. STRL and Tutor Perini Corp TPC are likely to benefit most from the increase in funding for transportation/highway projects over the next several years, especially due to their significant exposure to key states including California, which is long overdue for some infrastructure upgrades (see Burleson's track record here).

Through strong materials demand and improved funding, these three names are key ones to keep an eye on in the industry.

Granite Construction

“With GVA’s high exposure to California, Washington State, and New York, we continue to expect a growing volume of infrastructure projects to contribute meaningfully to the company’s backlog, revenue, and earnings over the next several years,” said Burleson.

Canaccord Genuity maintains a Buy rating on Granite Construction with a $70 price target.

Sterling Construction Company

“The pick-up in transportation infrastructure demand is likely to benefit STRL on several fronts. We also believe that the mix of work in heavy civil will continue to improve with a shift toward higher margin airport, rail and other non-highway projects,” he added.

Canaccord Genuity maintains a Buy rating on Sterling Construction with a $15 price target.

Tutor Perini

“We see a multi-year growth cycle ahead for TPC driven by the better funding environment for the Civil segment, particularly within TPC’s core California and New York markets. Meanwhile we expect the positive mix shift in backlog to continue disproportionately strong civil award activity,” Burleson said.

Canaccord Genuity maintains a Buy rating on Tutor Perini with a $35 price target.

Related Link: How To Trade The Expected Expansion In U.S. Infrastructure Spending