As 2025 comes to a close, the construction sector is navigating a rare combination of moderating monetary policy, easing inflation pressures and improving forward economic visibility — conditions that could support a more favorable setup for construction and infrastructure stocks in 2026.

In December, the Federal Reserve cut interest rates by 25 basis points for the third time in 2025, lowering the benchmark range to 3.5%-3.75%, while projecting one additional cut in 2026. Policymakers acknowledged a difficult balancing act: inflation remains above the Fed’s 2% target, while the labor market has softened and job growth has been volatile. Fed Chair Jerome Powell described the environment as challenging, noting risks on both the inflation and employment fronts.

Still, the Fed’s updated projections point to a gradually improving macro environment. Inflation is now expected to fall to 2.5% in 2026, GDP growth has been revised higher to 2.3%, and the unemployment rate is projected to edge down to 4.4%. For construction-related industries, financial conditions have already begun to ease. The 30-year fixed mortgage rate edged up to 6.22% as of Dec. 11, 2025, slightly higher than last week’s 6.19%, but below the 6.60% level a year ago. This depicts slightly improved affordability and project economics even before further rate cuts materialize.

While residential construction remains uneven, these shifts matter because construction demand today is increasingly driven by multi-year, non-discretionary investment cycles, including digital infrastructure, public works, grid modernization, water management and mission-critical facilities. Federal infrastructure funding, state and municipal spending pipelines, and private-sector investment in data centers and electrification provide longer-duration visibility that is less sensitive to short-term economic noise.

Against that backdrop, Wall Street’s favorite construction names tend to share three traits — multi-year backlog visibility, exposure to structurally funded spend categories, and operating discipline that converts growth into margins and cash.

Dycom Industries (DY Quick QuoteDY - Free Report) , Sterling Infrastructure, Inc. (STRL Quick QuoteSTRL - Free Report) , Comfort Systems USA, Inc. (FIX Quick QuoteFIX - Free Report) , Tutor Perini Corporation (TPC Quick QuoteTPC - Free Report) , and Advanced Drainage Systems, Inc. (WMS Quick QuoteWMS - Free Report) stand out as five companies Wall Street analysts are favoring and are also positioned to rally into 2026.

Share Price Performance

Image Source: Zacks Investment Research

Against this backdrop, we used the Zacks Stock Screener to identify construction stocks carrying a Zacks Rank #1 (Strong Buy) or #2 (Buy), with more than 70% of brokers rating them a strong or moderate buy. These names combine macro leverage with company-specific execution strengths that could support outperformance into 2026.

Dycom is leveraged to the accelerating buildout of fiber, wireless and data-center connectivity infrastructure. Demand for digital and AI-related networks remains strong and long-cycle in nature, giving Dycom unusually high backlog visibility as telecom and hyperscaler spending extends into 2026.

Dycom stock has surged 95.3% year to date (YTD) and currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for fiscal 2026 and 2027 EPS has increased to $10.71 (from $10.01) and to $14.45 (from $10.62) over the past 30 days. This indicates 35% EPS growth on 29.2% expected revenue expansion for fiscal 2027.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Sterling benefits from a portfolio increasingly tilted toward higher-margin infrastructure and data-center site development work. While housing-related activity is softer, Sterling’s exposure to mission-critical and transportation projects aligns well with multi-year public and private investment trends.

Sterling stock has gained 89.4% YTD and currently sports a Zacks Rank #1. The Zacks Consensus Estimate for 2026 EPS has increased to $11.95 from $10.98 over the past 60 days, indicating 14.6% growth on 19.1% expected revenue expansion.

Comfort Systems USA sits at the intersection of construction, electrification and technology-driven building demand. Its exposure to industrial, healthcare, institutional and data center projects provides insulation from residential cyclicality, while service work adds recurring stability as activity levels normalize.

Comfort Systems USA stock has surged 108.4% YTD and currently sports a Zacks Rank #1. The Zacks Consensus Estimate for 2026 EPS has increased to $30.61 from $25.48 over the past 60 days, calling for 16.4% EPS growth on 14.7% expected revenue expansion.

Tutor Perini is positioned to capitalize on sustained federal, state and municipal infrastructure spending. Large civil, transportation and public-building projects dominate its backlog, offering long-duration revenue visibility that aligns with the Fed’s expectation of steady growth rather than a sharp downturn.

Tutor Perini stock has gained 172.8% YTD and currently carries a Zacks Rank #2. The Zacks Consensus Estimate for 2026 EPS has increased to $4.72 from $4.63 over the past 60 days, indicating 17.7% EPS growth on 12.5% expected revenue expansion. It carries a VGM Score of A.

Advanced Drainage Systems or ADS plays a more defensive role within construction, benefiting from water management, stormwater and drainage needs tied to infrastructure upgrades and environmental regulation. These end markets tend to remain active even when broader construction cycles soften. With industry-leading margins, strong free cash flow and ongoing investments in capacity and acquisitions, ADS is positioned to benefit as infrastructure spending and land development activity stabilize into 2026.

WMS stock has gained 25.2% YTD and currently carries a Zacks Rank #2. The Zacks Consensus Estimate for fiscal 2026 EPS has increased to $5.98 from $5.87 over the past 60 days, implying 17.7% EPS growth on 12.5% expected revenue expansion.