4 Infrastructure Stocks to Buy on the Dip
As the economy recovers from its pandemic blues, the infrastructure sector is set for an impressive rebound. Furthermore, the sector is expected to generate stable returns with solid federal support....
As the economy recovers from its pandemic blues, the infrastructure sector is set for an impressive rebound. Furthermore, the sector is expected to generate stable returns with solid federal support. So, we think it could be wise to bet now on infrastructure stocks Eaton (ETN), CEMEX (CX), Brookfield (BIPC), and Fluor (FLR). Each has suffered price dips recently, but they all have solid upside potential. Let's discuss these names.
Many infrastructure projects have been halted or delayed over the last two years due to pandemic-led supply disruptions and labor shortages. However, conditions have been gradually stabilizing, with the resumption of both maintenance and new-construction activities. While the labor shortage and supply crunch might continue for some time, rising investments should help the industry grow.
The Biden administration's infrastructure bill is expected to help the industry flourish. According to Research and Markets, the construction industry in the United States is expected to grow at a 5% CAGR during 2022 - 2026. Also, the global infrastructure as a service industry is expected to grow at a 23.2% CAGR through 2027.
Given this backdrop, we think it could be wise to bet on fundamentally strong infrastructure stocks Eaton Corporation plc (ETN), CEMEX, S.A.B. de C.V. (CX), Brookfield Infrastructure Corporation (BIPC), and Fluor Corporation (FLR), which have each suffered price dips lately.
Eaton Corporation plc (ETN)
Based in Dublin, Ireland, ETN operates as a power management company. Its segments are Electrical Americas and Electrical Global; Hydraulics; Aerospace; and Vehicle. The company's mission is to improve the quality of life and the environment.
On Jan. 5, 2022, ETN acquired Royal Power Solutions, a U.S.-based manufacturer of high-precision electrical connectivity components. Heath Monesmith, president and CEO, Industrial Sector, ETN, said, "Growth opportunities tied to the electrification of our economy are accelerating, and Eaton is fully participating through our mobility and electrical businesses. And the addition of Royal Power Solutions enhances our ability to capitalize on this secular growth trend across our eMobility, aerospace, and electrical businesses."
ETN's net sales increased 2.4% year-over-year to $4.80 billion for its fiscal fourth quarter, ended Dec. 31, 2021. Its adjusted earnings came in at $691 million, up 18.9% year-over-year, while its adjusted EPS was $1.72, up 18.6% year-over-year.
For its fiscal year 2023, analysts expect ETN's revenue to be $21.76 billion, representing a 6.2% year-over-year rise. In addition, the company's EPS is expected to increase by 18.6% per annum over the next five years. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 13.6% in price to close yesterday's trading session at $152.17. It is currently trading 13.4% below its 52-week high of $175.72, which it hit on Nov.16, 2021.
ETN's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Sentiment and Quality. Within the B-Rated Industrial - Machinery industry, it is ranked #25 of 78 stocks. Click here to see the additional POWR Ratings for Growth, Value, Momentum, and Stability for ETN.
CEMEX, S.A.B. de C.V. (CX)
Headquartered in San Pedro Garza GarcÃa, Mexico, CX, together with its subsidiaries, produces, markets, distributes, and sells cement, ready-mix concrete, aggregates, clinker, and other construction materials worldwide.
On Feb. 2, 2022, CX and Synhelion announced the successful production of the world's first solar clinker, the key component of cement, a significant step towards developing fully solar-driven cement plants. Fernando A. Gonzalez, the CEO of CX, said, "The production of the first solar clinker is an exciting milestone for this transformational technology. It is proof of our commitment to deliver tangible outcomes through innovation to achieve our goal of delivering only net-zero CO2 concrete by 2050."
CX's net sales increased 3.5% year-over-year to $3.62 billion for the fourth quarter, ended Dec. 31, 2021. Its consolidated net income came in at $204.25 million, up 179.1%, and its operating EBITDA was $650.55 million, up 2.7% year-over-year.
Analysts expect CX's revenue to grow 5.5% year-over-year to $15.45 billion in its fiscal year 2022. Its EPS is estimated to grow 33.2% per annum for the next five years. The stock closed yesterday's trading session at $5.09. It is currently trading 44% below its 52-week high of $9.09, which it hit on June 25, 2021.
CX's strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system.
In addition, it has a B grade for Value and Quality. It is ranked #20 of 54 stocks in the B-Rated Industrial - Building Materials industry. Click here to see the additional POWR Ratings for CX (Growth, Stability, Momentum, and Sentiment).
Brookfield Infrastructure Corporation (BIPC)
New York City-based BIPC, together with its subsidiaries, owns and operates regulated natural gas transmission systems in Brazil. With a 100-year-plus heritage as a global owner and operator, BIPC focuses on investing in global infrastructure.
On Feb. 2, 2022, Sam Pollock, the CEO of BIPC, said, "2021 was a remarkable year for Brookfield Infrastructure, highlighted by our strong organic growth, capital recycling accomplishments, and the deployment of significant capital into new investments and other growth initiatives. We begin this year with a strong liquidity position and half of our 2022 deployment target already secured."
BIPC's revenues increased 28.3% year-over-year to $3.25 billion for the fourth quarter, ended Dec. 31, 2021. Its cash and cash equivalents came in at $1.41 billion for the period ended Dec. 31, 2021, compared to $867 million for the period ended Dec.31, 2020. And its total assets were $73.96 billion, versus $61.33 billion for the same period.
Over the past year, the stock has gained 5.1% in price to close yesterday's trading session at $71.27. It is currently trading 11.6% below its 52-week high of $80.60, which it hit on July 7, 2021.
BIPC has an overall B rating, which equates to a Buy in our proprietary rating system.
Fluor Corporation (FLR)
FLR provides engineering, procurement, and construction (EPC); fabrication and modularization; operation and maintenance; asset integrity; and project management services worldwide. It has four segments: Energy Solutions; Urban Solutions; Mission Solutions and Other. FLR is headquartered in Irving, Tex.
On Feb. 22, 2022, David Constable, the CEO of FLR, said, "With a strengthened capital structure and a renewed focus on the key markets we serve, we ended 2021 on a positive note and are starting 2022 by building on this encouraging momentum."
FLR's energy solutions revenue came in at $1.28 billion for the fourth quarter, ended Dec. 31, 2021, up 19.1% year-over-year. Its mission solutions revenue also increased 14% year-over-year to $880 million. The company's total segment profit came in at $137 million, up 77.9% year-over-year.
For its fiscal year 2023, FLR's revenue is expected to increase 12.5% to $13.79 billion, and its EPS is estimated to increase 38.1% to $1.16 in 2022. It surpassed the consensus EPS estimate in three of the four trailing quarters. Over the past year, the stock has gained 34.3% in price to close yesterday's session at $23.32. It is currently trading 9.2% below its 52-week high of $25.68, which it hit on Dec.14, 2021.
FLR has an A grade for Growth. It is ranked #34 of 54 stocks in the B-Rated Industrial - Building Materials industry. Click here to check additional FLR ratings (Value, Momentum, Stability, Sentiment, and Quality).
ETN shares rose $0.08 (+0.05%) in premarket trading Thursday. Year-to-date, ETN has declined -11.95%, versus a -7.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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