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.
Stockchase Research Editor: Michael O'Reilly BDT operates as a contractor in the Canadian construction market. As new vaccines roll out, we bet work on infrastructure projects will ramp up quickly in the new year. It pays a good dividend that is backed by a 71% payout ratio. We would buy this with a $6.50 stop-loss,…
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.
In the construction space his favorite is WSP Global. SOX is similar and he thinks they may be a value trap as there is some concerns about the dividend, the strength of the balance sheet and their ties to the energy sector.
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.
Debt levels are coming up. Still lots of runway. More of a sense of urgency about getting infrastructure projects done. Positive tailwind on infrastructure. You want to own consulting and engineers. Good upside on valuation multiple.
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.
Has a $1B market cap. A play on Canadian infrastructure spending. The yield is decent around 4%. Trades at 5x enterprise value to EBITDA. Trades at a 34% discount to US comparables. 97% growth expected this year, with a PE of less than 16x. Could see a 2-3x upside if it breaks $23. (Analysts’ price…
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.
Have been adding to it since last June. Grows by acquisitions and organic growth. Global in nature. Latest acquisition was in environmental design and consulting firm which will have good growth. The balance sheet remains solid and allows for more acquisitions. Half of the business is in infrastructure and could benefit from Biden's infrastructure plan.…
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.
In the news a lot, and you never know what's going to come up from the past. Better E&C companies out there, such as WSP Global. It trades at a premium, but there's a reason for that. Better track record, recent acquisition will lead to growth opportunities, leveraged to environmental services that will be a…
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.
Customized, prefabricated environmental office interior solutions. High net cash position. Significant upside because of their flexible business model. Surge in office reconfiguration taking place across North America. Top management. No dividend. (Analysts’ price target is $3.46)
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.
(A Top Pick July 18/17 Up 14%). This is a leader in infrastructure for pipelines and wireless network towers. He sees 5G adding headwinds and thinks the pipeline business will renew its growth. He would still be buying here.
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.
(Top Pick Aug 31/16, Up 16.91%) He has been accumulating more of this. The management team has been pretty astute at picking away at assets. There is some growth as well as the dividend.
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.
A new position for him. Small cap. 19x earnings, good balance sheet. Debt to total capital is 22%, relatively low. Recent acquisition gives them entry into 5G. Will benefit from infrastructure build. Backlog is about 2x annual sales. Yield is 0.76%. (Analysts’ price target is $127.50)
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 political risk is prevalent across the industry, as we saw with SNC. There are better opportunities. The business is highly cyclical and subject to government policies. He would stay away, but it is a high quality company in the space.