January 24, 2025

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Heavy Construction Industry Gains Momentum: 5 Stocks to Watch

Heavy Construction Industry Gains Momentum: 5 Stocks to Watch

The Zacks Building Products – Heavy Construction industry is poised to sustain its growth trajectory, driven by a robust infrastructure push led by the U.S. government. This initiative emphasizes critical upgrades to the nation’s roads, bridges, and broadband infrastructure. Industry participants are experiencing heightened demand across key segments such as communications, power transmission, and large-scale infrastructure projects.

Despite headwinds like project delays, labor market competition, and rising costs, companies such as EMCOR Group Inc. EME, MasTec, Inc. MTZ, Granite Construction Incorporated GVA, Primoris Services Corporation PRIM and Great Lakes Dredge & Dock Corp. GLDD are well-positioned to seize opportunities in this expanding market. While macroeconomic challenges could affect certain customer decisions, these firms are strategically equipped to thrive in this dynamic sector.

Industry Description

The Zacks Building Products – Heavy Construction industry consists of mechanical and electrical construction, industrial and energy infrastructure as well as building service providers. This industry comprises heavy civil construction companies that specialize in the building and reconstruction of transportation projects, including highways, roads, bridges, airfields, ports and light rail. The companies serve commercial, industrial, utility and institutional clients. The industry players are engaged in the engineering, construction and maintenance of communications infrastructure, oil and natural gas pipelines, as well as processing facilities for energy and utility industries. These firms are also engaged in mining and dredging services in the United States and internationally.

4 Trends Shaping the Future of the Heavy Construction Industry

U.S. Administration’s Infrastructural Endeavor: The U.S. administration’s ambitious infrastructure plan, aimed at creating modern, sustainable infrastructure and a cleaner future, is set to have significant implications for the economy and the construction industry over the next five years. This comprehensive initiative includes accelerated investments across diverse areas such as roads, bridges, green spaces, water systems, electricity grids, and universal broadband. By laying the groundwork for sustainable growth, the plan seeks to mitigate the effects of climate change and enhance public health, ensuring access to clean air and water. This expansive infrastructure agenda could be a major boost for companies involved in construction and related sectors.

Strong Prospects in Telecommunication: The ramp-up of projects related to 5G has been a silver lining for the industry players. The increased demand from telecom customers for wireline networks, wireless/wireline converged networks and wireless networks using 5G technologies has been benefiting industry players. Construction work for communications is expected to pick up on huge investments in network expansion. Also, the industry is poised to gain from a significant number of project awards across multiple segments, including communications, health care, transmission and power, along with infrastructural projects in domestic and international markets.

Solid Inorganic Moves & Renewable Business Prospects: Acquisitions have been companies’ preferred mode of solidifying product portfolios and leveraging new business opportunities. Again, due to increased renewable project activity and the expansion of services in biomass and other smaller production facilities, the power generation and industrial construction market is poised to see sizable growth. The companies are well-positioned to gain from the renewable energy drive of the pro-environmental Biden administration. The development and deployment of technology solutions across the full spectrum of decarbonization efforts, comprising all facets of infrastructure for providing carbon-free energy solutions, should benefit the companies going forward.

Macroeconomic Challenges: The biggest headwinds for the industry players are centered around macroeconomic challenges and labor availability. In addition to a tight labor market, a rise in raw material costs is a concern. Meanwhile, the businesses of the industry players are susceptible to the cyclical nature of the markets in which clients operate and are dependent on the timing and funding of new awards. Hence, volatility in credits and operating risks associated with economic down cycles are pressing concerns. Macroeconomic effects may dampen the near-term execution of some customer plans.

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