Construction and engineering stocks include companies that build residential and non-residential building construction, contract services and other building, material and infrastructure related companies. Although many analysts believe the global economy is cooling, there has been a secular trend in growth due to increasing economic activities. Office buildings, retail space and housing are at the core of building and engineering companies. With lower interest rates, there is a stimulus to borrow in order to build.
Here are the top construction and engineering companies to consider:
⚒🧱 Construction & Engineering
Bird Construction Income Fund (BDT-T)
The company and management are well liked by analysts. They are mostly focused in the West. The stock price has been under pressure due to low margins and some operational hiccups in the last year. However, this could be a turnaround story.
Has held in remarkably well given the manufacturing slowdown in Canada. One of his largest holdings in one of his funds. One of the 2 cheapest stocks in the universe that he covers. A really strong ROE at 23%. Trading at 4.5X Price to Free Cash Flow, so is really cheap. Dividend yield of 6.5%.…
Boyuan Construction Group Inc (BOY-T)
A small cap construction company. It is engaged in residential and commercial building construction as well as municipal infrastructure projects in China. Their book value is far above their current stock price.
This is a funny one. The book value is $4.80. They started a few more projects in China. It is not for him, but he can see why somebody would like it.
Stuart Olson Inc (SOX-T)
The company has disappointed with their fixed contracts going over cost. They have been traditionally based in the West and the economy has slowed down. However, analysts believe it should be worth more and it could see the price take off.
(A Top Pick Jan 7/16. Up 8.19%.) This has been a troubled company. They ran into some contracts that went over budget. Largely exposed to energy, but are also very well exposed to infrastructure and mining. Made an acquisition a couple of years ago, which in the next quarter there might be a possibility of…
Stantec Inc (STN-T)
An international professional design and consulting industry company. They are based in Edmonton. They recently sold off their construction side of the business where margins were poorer. The company is focusing on their engineering segment.
They just sold their construction business, which is a catalyst. Their contruction obscured their consulting business which will shine thought now. Got a good balance sheet so they can contine to buy. 17% EPS growth. It's trading below its peers. An infrastructure play, so even in a late cycle they can still attract capital. (1.65%…
Aecon Group Inc (ARE-T)
The largest publicly traded Canadian construction company. They have three core segments which are infrastructure, energy and mining. It’s been cited a top pick by many analysts and their chart continues to show a strong uptrend.
3-5-year horizon, given Ontario government planning $30-billion infrastructure spending A good company that will do well in that time horizon. Caveat: Capex projects like the one Ontario is announcing take a long time to get going. Instead, look at an infrastructure's backlog of projects--buy when that backlog is going up.
WSP Global Inc. (WSP-T)
A management and consultancy service for buildings. They have been a beneficiary of the SNC Lavalin scandal and their price has gone up. They largely grow by acquisition.
The management team has a great track record. They have met all their promises to pay down debt and increase revenue with better things yet to come. Yield 2.23% (Analysts’ price target is $75.18)
SNC-Lavalin Group Inc. (SNC-T)
The scandal ridden company has put pressure on the company’s stock price. There is threat of class-action litigation and official prosecution. The underlying value is more than the current stock price.
His model price is $24.26, below current prices, but this is book value as he sees it. SNC is interesting now (he's not recommended it before). This is worth a speculation around $23. Wait for a pullback.
DIRTT Environmental Solutions (DRT-T)
A company that provides technology used in construction and design. Their main activity is in healthcare and office design. Jim Huang has chosen this company as his Top Pick twice recently.
(A Top Pick July 28/15. Down 18.89%.) This is basically a modular furniture company, but more than that they have innovative design technology. You can sit in a room and, given the software, you can visualize what it is going to look like and what the price is going to be, and build it right…
Mastec Inc (MTZ-N)
An American multinational infrastructure company. A leader in pipelines and wireless network towers. With the growth of 5G, the company is expected to grow.
Focused in 3 areas. 1) Optical networking, 2) pipelines for gas infrastructure and 3) electrical grid. Recently broke out above multi-year highs. Business should grow about 15% this year but there are a lot of opportunities coming as there is about $200 billion to be spent on natural gas infrastructure. In wireless 70% of the…
Quanta Services (PWR-N)
An engineering, procurement and construction services company in the energy sector. The management team is very effective and pays a nice dividend.
Largest contractor to gas and electric industries in the US. About 80% of their work is to electrical transmission utilities where spending is at a record level. Replacing old infrastructure and the utilities have the money to do this. That is going to continue, because two thirds of the infrastructure is near ending its useful…
Jacobs Engineering Group Inc. (JEC-N)
The largest engineering company in the S&P 500. The trend for public construction spending is up. Jon Vialoux chose it as a top pick at the beginning of October.
Fluor Corp. (FLR-N)
A multinational engineering and construction firm. The company experienced multiple problems in 2018 and the stock sold off. Analysts still believe the business is good, though management has been ineffective in a couple projects.
The macro argument is that with the coming of the recovery in the US and eventually Canada, there will be a lot of money spent on infrastructure. Two others are JEC-N and SNC-T and to a lesser extent STN-T. He wants to see more of an improvement before jumping into them.