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7 Construction Stocks to Ride on Biden's Infrastructure Deal

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President Joe Biden hailed a much-awaited bipartisan agreement on a $973-billion infrastructure plan, following a meeting with a group of 21 senators (11 Republicans and 10 Democrats).

Following the announcement of this infrastructure plan and a slew of other economic data, construction-related stocks outperformed the market.

During Thursday's regular trading day, Dow Jones Industrial Average jumped 1%, the S&P gained 0.6% and Nasdaq was up 0.6% after the announcement. Shares of machinery giant Caterpillar (CAT - Free Report) , building-materials supplier Martin Marietta Materials (MLM - Free Report) and construction-aggregates producer Vulcan Materials (VMC - Free Report) leapt 2.6%, 2.61% and 3.27% higher, respectively. Other construction stocks like Dycom Industries (DY - Free Report) , Fluor (FLR - Free Report) and MasTec (MTZ - Free Report) gained 5.79%, 4.51% and 3.58%, respectively.

Harbinger of Hope: Infrastructural Deal

A bipartisan agreement had been reached on the $973-billion infrastructure plan over five years. Although a very few details of the pact were disclosed, the plan will have $579 billion in new spending over the next five years that could open the door to the president’s momentous $4 trillion proposals later on, according to reports.

Per a report from CNBC, $312 billion has been allocated for transportation, and $109 billion will be spent on roads, bridges and other key projects over the next five years. Also, $66 billion will be invested for passenger and freight rail, and $49 billion in public transit. Furthermore, $266 billion will be allocated toward non-transportation infrastructure, including investments in power, broadband, and clean water. Meanwhile, $15 billion will be spent on electric vehicle infrastructure.

Notably, the American Society of Civil Engineers provided a poor grade for the nation's roads in its 2021 report. The report says that 40% of the system is currently in bad condition. Bridges, schools and other key infrastructure in the country also require revamp.

Biden administration’s endeavor to pump money into rebuilding the nation's roads, bridges, and other infrastructure would give construction companies like United Rentals (URI) and others a solid foundation for growth.

Solid Q1 GDP & Lower Jobless Claims: A Boon

Apart from the infrastructure deal, solid first-quarter GDP and lower weekly jobless claims have been major motivating factors for investors. The U.S. economy grew at a solid 6.4% rate in the first three months of the year, the Commerce Department stated on Thursday. This is higher than the 4.3% tally for the fourth quarter, setting the stage for what economists believe to be the strongest year for the economy in about seven decades.

Other economic data that was released on Thursday also depicts the fact that the United States has gained traction, after being impacted by the pandemic. Notably, initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 411,000 for the week ended Jun 19, as released by the Labor Department on Thursday. Although it remains above the 400,000 mark, weekly claims have dropped steadily this year from about 900,000 in January.

On a further encouraging note, consumer spending grew at an annual rate of 11.4% in the first three months of the year, the Commerce Department stated on Thursday. Spending was up from the 11.3% growth estimate made a month ago. Stimulus payments that were included in the $1.9-trillion support package passed by the Congress in March benefited the most.

Top Construction Picks

The construction market’s fate — which is tied to the broader economic scenario — is expected to be resilient, given the above-mentioned tailwinds.The Construction sector has a Zacks Rank of 1 at present (out of 16 sectors). The sector has risen 58.8% over the past year, outperforming the S&P 500’s 44.1%, as you can see below. About 90% of the industries under the sector have a Zacks Rank in the top 44%, with many stocks seeing rank upgrades and positive earnings estimate revision.

Zacks Investment ResearchImage Source: Zacks Investment Research

With the help of our Zacks Stock Screener, we have selected seven stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy), justifying their strong fundamentals. A solid sector rank with strongprospects is quite a combination to look out for in stocks, especially for investors beefing up their portfolio in the second half of the year amid uncertainty arising from rising raw material costs and supply chain disruptions. Notably, all the seven stocks have outperformed the construction sector over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chosen construction stocks with encouraging prospects are MasTec, Weyerhaeuser (WY - Free Report) , U.S. Concrete , Advanced Drainage Systems (WMS - Free Report) , United Rentals, Martin Marietta Materials and Jacobs Engineering Group (J - Free Report) .

Take a quick look at the best performers and the stocks’ key metrics in the table below:

Zacks Investment ResearchImage Source: Zacks Investment Research

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>

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