Construction, Concrete and Asphalt Prices Keep Going Up: Stocks to Consider
Why not take advantage of burgeoning construction and asphalt costs? Here's what you can do.
If you, like me, planned to pour a driveway this year, you might want to rethink your plans. Asphalt and concrete prices continue to skyrocket, which means you'll pay more for pavement and parking lot repair. Some road projects have ground to a halt and have led many homeowners to seek other ways to maintain the condition of their driveways to prevent major replacement costs.
In addition to that, construction prices have seen drastic changes in overall building material prices. The latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics shows the newest data. Soaring lumber prices, which have tripled over the past 12 months, have caused the price of an average new single-family home to increase by almost $36,000, according to the NAHB Economics team.
We'll help you think about ideas for investing in new home construction — investing in the stocks of these companies might be a bigger win than adding an addition to your home.
Why Consider Investing in Construction, Concrete, and/or Asphalt?
You can invest in the construction industry in many different ways — from investing in the structures and lumber involved to the paint on the walls to the concrete used to pour the foundation. The construction sector offers hundreds of companies in which you can invest. Whether you buy stocks with large home builders, diversify with ETFs and mutual funds, consider public infrastructure, or consider technology, think of everything wrapped up in the construction of a new home before you invest.
Consider various sectors as well: infrastructure (public works projects), industrial (refineries, factories, and power plants), and buildings (including residential and nonresidential and commercial buildings).
Vulcan Materials Co., headquartered in Birmingham, Alabama, provides basic materials and supplies for the infrastructure and construction industry through several segments, including aggregates, asphalt, concrete, and calcium. The company sells asphalt mix and ready-mixed concrete in its mid-Atlantic, Georgia, Southwestern, Tennessee, and Western markets. Ready-mixed concrete goes to California, Georgia, Maryland, New Mexico, Texas, Virginia, Washington, D.C., and the Bahamas. The company also produces calcium products for the animal feed, plastics, and water treatment industries.
In Q4, Vulcan's total revenues increased 37% to $1.606 billion, driven by the addition of concrete operations as well as strong growth in legacy aggregates business. Aggregates gross profit increased 18% to $326 million, or $5.64 per ton. Non-aggregates gross profit was $26 million compared to $27 million last year.
For the full year, total revenues increased 14% to $5.6 billion and earnings from continuing operations increased 15% to $674 million. Adjusted EBITDA increased 10% to $1.451 billion.
The company showed strong earnings growth despite a $93 million earnings impact from higher energy-related costs. Aggregate gross profit increased 12% to $1.296 billion, or $5.81 per ton.
Nucor Corp., the largest steel manufacturer in the U.S., and one of the most consistently profitable is headquartered in Charlotte, North Carolina. Nucor manufactures steel and steel products through a few segments: steel mills, steel products, and raw materials. It manufactures carbon and alloy steel in sheet, bars, structural and plate, steel trading businesses, rebar distribution businesses, and in Nucor's equity method investments. Its steel products segment produces steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, steel fasteners, metal building systems, steel grating, tubular products businesses, piling products businesses, and wire and wire mesh. Its raw materials segment manufactures direct reduced iron and ferrous and nonferrous metals.
Nucor reported consolidated net earnings of $2.25 billion, or $7.97 per diluted share, in Q4 2021. It grew from Q3, from $2.13 billion, or $7.28 per diluted share, and $398.8 million, or $1.30 per diluted share, for the fourth quarter of 2020.
Nucor also had consolidated net earnings of $6.83 billion compared with consolidated net earnings of $721.5 million in 2020.
Nucor's consolidated net sales increased to $10.36 billion in Q4 compared with $10.31 billion in Q3 and increased 97% compared with $5.26 billion in the fourth quarter of 2020.
For 2021, Nucor reported:
- Consolidated net sales of $36.48 billion, a whopping 81% increase compared with consolidated net sales of $20.14 billion reported in 2020.
- Total tons shipped to outside customers in 2021 were 28,247,000, an increase of 11% from 2020.
- The average sales price per ton in 2021 increased 64% from 2020.
Summit Materials Inc., headquartered in Denver, Colorado, is a construction materials company. Summit Materials manufactures construction materials and related downstream products in several segments, including its supplies aggregates, ready mix concrete, asphalt paving mix and paving, and related services.
In Q3 2021, Summit Materials reported net income attributable of $74.2 million, or $0.63 per basic share, compared to net income of $90.7 million, or $0.79 per basic share the year before.
Summit's net revenue increased $17 million, or 2.6% in Q3 2021 to $662.3 million, compared to $645.2 million in Q3 2020. Summit also reported an operating income of $125 million in Q3, an increase of 24.3%, compared to $100.6 million in the prior-year period. Sales volumes increased and adjusted cash gross profit for aggregates expanded to $96.7 million in Q3 2021, an increase of 26.1% relative to $76.7 million in past quarters.
The company also had $258.1 million in cash and $1.6 billion in debt outstanding.
Think Outside the (Home-Shaped) Box
President Biden's almost $1 trillion infrastructure plan may also give you ideas within the construction stocks sector. You may want to pluck companies such as Caterpillar Inc. (NYSE: CAT) and Martin Marietta Materials Inc. (NYSE: MLM) and put them into your portfolio.
There's no reason you have to stick to the elements that make up construction. Think more widely when you invest, such as the use of drones to scope out potential job sites and for the use of aerial virtual tours. Additionally, consider smart technology for lighting, temperature, appliances, and sound.
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