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.
The overall yield is 5.8%. The dividend seems to be well covered. The earnings for last quarter were 33% higher than expected. The outlook for the company is pretty good. The acquisition could offer good synergy.
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.
He's surprised it trades below $14. Their business is defensive and they have the highest backlog they have ever had. Investors are probably discounting the company for the concessions they have made. These assets are good long-term value providers but it is weighing on the stock price. They just need to continue to do what…
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.
(A Top Pick Sep 30/19, Up 16%) There is still good opportunities in the engineering consulting side. There is potential large spending in infrastructure. The model average return is 26%.
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.
It is one of his favourite stocks right now. Some of its attributes will shine in 2021. The 407 is used a lot more again post-COVID shut down. He is not worried about their debt.
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.
He has their product in his office. The stock is struggling. They lowered guidance twice this year. They have a new management team in place. They are re-vamping their sales strategy. The change of management is taking more time than expected. Watch it as they try to go to a more professional organization. Turnarounds don't…
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 Top Pick Oct 03/19, Down 2%) Still decent, though hit by bad earnings recently. There could be a giant US infrastructure build next year by Washington. He's concerned that this is underperforming the market and is trading below its 200-day moving average.
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.
(A Top Pick Sep 6/17, Up 28%) He does not like it much anymore and sold it. You have to trust the execution of management. The fact was they had an issue and said it was fixed. They had a follow up issue and then another and he felt it was out of control. It…