Back to top

Image: Bigstock

Top 5 Stocks to Gain in 2022 From U.S. Infrastructure Spending

Read MoreHide Full Article

Wall Street has been suffering since Black Friday as the resurgence of coronavirus with its new variant – Omicron – has shaken market participants’ confidence across the globe. Market participants seem nervous as the coronavirus-led massive fiscal stimulus has ended and the Fed has decided to systematically eliminate the monetary stimulus paving the path for the first rate hike next year since March 2020.

At this stage, the new law of the Biden administration to spend $1 trillion in infrastructure development will act as a new catalyst for Wall Street. Various companies will gain from this project. Notable among them are Commercial Metals Co. (CMC - Free Report) , Crane Co. (CR - Free Report) , Altair Engineering Inc. (ALTR - Free Report) Clearfield Inc. (CLFD - Free Report) and TimkenSteel Corp. (TMST - Free Report) .

Biden's Infrastructure Project

On Nov 15, President Joe Biden signed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. With this the bill has become a new law. The law aims at establishing the United States with the world's best economic infrastructure. Total spending may go up to $1.2 trillion if the plan is extended to eight years.

The infrastructure development law will provide $100 billion toward roads, bridges and other major projects. It will invest $66 billion in freight and passenger rail, including potential upgrades to Amtrak. The project will provide $11 billion toward reducing car crashes and fatalities through a “Safe Streets for All” program. The law allocates $39 billion to modernize public transit and improve access for disabled people.

In addition, the law has proposed $66 billion for passenger and freight rail, $15 billion for electric vehicles and buses, and $17 billion for airports, ports and waterways. The project will invest $50 billion in water infrastructure and $55 billion in clean water projects. Moreover, $65 billion will be invested in high-speed Internet (broadband), $21 billion in environmental clean-up and $73 billion in Power infrastructure.

Future Driver for Wall Street

The newly introduced massive infrastructure development project will be a major catalyst for the U.S. stock markets in 2022. Various segments of the economy such as basic materials, industrials, telecommunications and utilities will benefit immensely with more job creation for the economy.

Moreover, the White House has also put pressure on U.S. Congress to quickly pass legislation providing $52 billion to help computer chip manufacturers and ease the shortage of components vital for a range of industries.’

The global economy is still suffering from the woods of different variants of coronavirus and the United States is no exception. Moreover, the inflation rate in the United States has soared to a level highest in four decades.

In the absence of the pandemic-induced fiscal and monetary stimulus, the two above-mentioned developmental plans of the Biden administration, infrastructure projects and the proposed CHIPS Act to usher in a resurgence of semiconductor manufacturing in the United States, will play the role of the stock market’s future catalysts.

Our Top Picks

We narrowed our search to five stocks that are likely to gain from the Biden administration’s infrastructure development legislation. These companies have strong growth potential for 2022 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past three months.

Zacks Investment ResearchImage Source: Zacks Investment Research

Commercial Metals is poised to gain on robust steel demand, stemming from elevated spending on the residential and construction sector in North America and recovery in the manufacturing sector. Steel sales volumes in Europe are anticipated to remain healthy on increasing demand from the construction and industrial end market.

Construction activity in Poland remains particularly strong aided by the residential markets. These factors will boost steel shipment levels in North America and Europe, and support CMC’s results in fiscal 2022.

Zacks Rank #2 CMC has an expected earnings growth rate of 10.5% for the current year (ending August 2022). The Zacks Consensus Estimate for current-year earnings improved 0.5% over the last 7 days.

Crane manufactures and sells engineered industrial products in the United States, Canada, the United Kingdom, Continental Europe, and internationally. Crane Co. is poised to benefit from its diverse portfolio and efficient management team. CR has exposure in many end markets like non-residential construction, aerospace, electronics, automated payment solutions, chemical, power and various general industries.

Zacks Rank #2 CR has an expected earnings growth rate of 13.2% for next year. The Zacks Consensus Estimate for its next-year earnings has improved 4% over the last 60 days.

Clearfield designs and manufactures the FieldSmart fiber management platform including its latest generation Fiber Distribution System and Fiber Scalability Center. CLFD also provides a complete line of fiber and copper assemblies for controlled and outside plant environments.

Zacks Rank #1 Clearfield has an expected earnings growth rate of 25.9% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the last 60 days.

TimkenSteel  is engaged in manufacturing alloy steel, along with carbon and micro-alloy steel. TMST provides air-melted alloy steel bars, tubes, and precision components, as well as value-added services, including thermal treatment and machining in the United States and internationally. TimkenSteel operates in the SBQ Steel Bar, Seamless Mechanical Steel Tubes, and Billets; and Value-added Precision Products and Services segments.

Zacks Rank #1 TimkenSteel has an expected earnings growth rate of 0.7% for next year. The Zacks Consensus Estimate for next-year earnings has improved 10.2% over the last 60 days.

Altair Engineering is focused on the development and broad application of simulation technology to synthesize and optimize designs, processes and decisions for business performance. Altair Engineering operates through two segments, Software and Client Engineering Services.

Zacks Rank #2 ALTR has an expected earnings growth rate of 12.3% for next year. The Zacks Consensus Estimate for next-year earnings has improved 4.9% over the last 60 days.

Published in