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3 Microcaps to Benefit from Federal Highway Spending

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As one whisks by the seemingly endless rows of orange barrels on US highways and bridges this summer, it is quite apparent that infrastructure spending is alive and well.

Recall that the IIJA (Infrastructure Investment and Jobs Act) was passed at the end of 2021 with a price tag of $1.2 trillion over a 5-year period. Of this amount, $300B was specifically earmarked for roads and bridges.

The White House website, which chronicles the progress of the spending, reports that $454B has been awarded and is in route to local governments representing over 57,000 projects. Projects on bridges total 13,000 thus far, with improvements also slated for 257,000 miles of roads. We previously commented on infrastructure spending as a macro theme for microcaps here.

We believe the following three microcaps under coverage by Zacks should benefit from this continued infrastructure spending:

Gencor Industries, Inc. (GENC - Free Report) manufactures asphalt plant equipment sold into the highway construction industry. The company recently reported a 35% increase in backlog YOY for the March quarter, as well as a balance sheet containing $117.1 m of cash and marketable securities with $0 debt. The greatest risk factor for Gencor Industries and the other mentioned companies is the timing of backlog conversion to sales, which could result in lumpy revenue streams.

The Monarch Cement Co. (MCEM - Free Report) is a manufacturer of portland cement and sells primarily in the Midwest to concrete mixer plants, building material dealers, and government agencies. The company is debt-free with $45.8 m in cash ($12.38/share) and owns raw material reserves of 50+ years. The Monarch Cement Co. provides other products including masonry cement, ready-mixed concrete, concrete, and building materials. In the March quarter, sales increased 8% with a 40% increase in operating income.

Smith-Midland Corp. (SMID - Free Report) manufactures and installs precast concrete products and systems in the United States. Some products include sound walls, highway barriers, vaults for utility applications, and precast buildings. Backlog increased 26% YOY to $64.6 m and the company plans to double the capacity of its North Carolina plant. We are presently maintaining a Neutral rating for Smith-Midland Corp. based on valuation.

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Gencor Industries Inc. (GENC) - free report >>

Smith-Midland Corp. (SMID) - free report >>

The Monarch Cement Co. (MCEM) - free report >>

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