Infrastructure forms the backbone of the global economy, constituting the roads we drive on to the systems that deliver our data and energy. Infrastructure stocks are expected to profit from investments in roads, bridges, utilities, and energy, which are getting significant government support and providing investors with encouraging opportunities.
Given this backdrop, it could be a wise decision to invest in fundamentally strong infrastructure stocks like Johnson Controls International plc (JCI), EMCOR Group, Inc. (EME), and Owens Corning (OC) to build your portfolio this year.
The world economy is in a critical position right now, and lasting solutions need to be found to address socio-economic problems. With large sums of money going toward cutting-edge infrastructure technology and renewable energy projects, the trend toward clean energy and smart infrastructure is picking up speed. This includes projects to enhance energy efficiency, develop smarter, more resilient communities, and improve transportation networks.
On the same note, the Biden-Harris Administration has recently announced $1.8 billion in grants for 148 infrastructure projects across the United States as a part of the Rebuilding American Infrastructure with Sustainability and Equity (RAISE) program. The spending is expected to impact the infrastructure in several states in the foreseeable future.
Also, according to a report by Mordor Intelligence, the infrastructure sector will expand from $2.72 trillion in 2024 to $3.69 trillion by 2029, growing at a CAGR of 6.3%.
Considering these factors, let’s evaluate the three infrastructure picks.
Johnson Controls International plc (JCI)
JCI offers smart, healthy, and sustainable buildings through four segments: Building Solutions North America; Building Solutions EMEA/LA; Building Solutions Asia Pacific; and Global Products. The company works in designing, selling, installing, and servicing heating, ventilation, air conditioning, controls, building management, refrigeration, and integrated electronic security systems.
On July 23, JCI announced its definite agreement to sell its Residential and Light Commercial (R&LC) HVAC business in an all-cash transaction to the Bosch Group for $8.1 billion, with the company's portion of the consideration being $6.7 billion approximately. With this transaction, JCI can move toward its next growth phase to deliver enhanced, long-term value to shareholders.
On June 18, JCI announced its definitive agreement to sell its Air Distribution Technologies business to Truelink Capital, a middle-market private equity firm. With these sales, JCI expects to simplify its portfolio and advance its transformation into a comprehensive solutions provider for commercial buildings while focusing its resources on more attractive opportunities.
For the fiscal 2024 third quarter that ended on June 30, JCI’s net sales increased 1.4% year-over-year to $7.23 billion. The company’s gross profit increased marginally from the prior year’s quarter to $2.49 billion. Its adjusted net income attributable to JCI came in at $769 million or $1.14 per share, indicating an increase of 8.9% and 10.7% year-over-year, respectively.
Analysts expect JCI’s revenue to increase 6% year-over-year to $7.32 billion for the fiscal fourth quarter ending September 2024. Its EPS for the ongoing quarter is also expected to increase 18.3% year-over-year to $1.24.
JCI’s stock has gained 36.3% over the past nine months and 22.1% over the past year to close the last trading session at $71.45.
JCI’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
JCI has a B grade for Growth and Sentiment. It is ranked #29 among 80 stocks in the Industrial - Services industry.
Click here to access JCI’s ratings for Value, Stability, Momentum, and Quality.
EMCOR Group, Inc. (EME)
EME is a specialty contractor offering electrical and mechanical construction, building, and industrial services to various clients. With around 100 subsidiaries, the company provides services in various sectors, including construction, operation, maintenance, and management of facilities in the United States, Canada, and the United Kingdom.
EME’s revenues increased 20.4% year-over-year to $3.67 billion in the fiscal 2024 second quarter that ended June 30. The company’s gross profit and operating income also came in at $684 million and $322.81 million, showing increases of 39.6% and 69.2% year-over-year, respectively. Its net income came in at $247.57 million or $5.25 per share, indicating increases of 76.1% and 78% year-over-year, respectively.
As of June 30, 2024, EME’s cash and cash equivalents stood at $807.32 million compared to $789.75 million on December 31, 2024.
EME’s consensus revenue estimate of $3.79 billion for the fiscal third quarter ending September 2024 reflects a year-over-year increase of 18.2%. Also, for the same quarter, its EPS is expected to increase 37.5% from the prior year’s period to $4.97. EME has surpassed consensus revenue and EPS estimates in all of its trailing four quarters, which is impressive.
Shares of EME have surged 37.3% in the past six months and 73% in the past year to close the last trading session at $380.87.
EME’s strong outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
EME has a B grade for Growth, Sentiment, and Quality. It has ranked #2 out of 80 stocks in the Industrial - Services industry.
Click here to access EME’s ratings for Stability, Value, and Momentum.
Owens Corning (OC)
OC is a global manufacturer and seller of building and construction materials. It operates through three segments: Roofing; Insulation; and Composites. Its product offerings include laminate and strip asphalt roofing shingles, oxidized asphalt materials, various roofing components used in residential and commercial construction, and specialty applications.
On May 15, OC acquired Masonite International Corporation, a leading global provider of interior and exterior doors and door systems. OC acquired all outstanding Masonite common shares for $133 per share, resulting in an implied transaction value of approximately $3.9 billion. The acquisition marked a significant milestone for OC, strengthening its position as a market leader in building and construction materials.
For the fiscal 2024 second quarter that ended June 30, 2024, OC reported net sales of $2.79 billion, indicating an 8.8% year-over-year increase. The company’s adjusted EBITDA increased 11.7% from the year-ago value to $742 million. Adjusted earnings attributable to OC came in at $408 million and $4.64 per share, up 5.2% and 9.2% year-over-year, respectively.
Analysts project OC to achieve $11.03 billion in revenue for the fiscal year ending December 2024, reflecting a 13.9% year-over-year increase, and its EPS for this fiscal year is expected to reach $15.40, increasing by 6.8% year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, OC shares have gained 25.2%, closing the last trading session at $167.22.
OC’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Momentum. Within the B-rated Industrial - Building Materials industry, OC is ranked #14 out of 46 stocks. Click here to access additional ratings for OC (Growth, Value, Sentiment, Quality, and Stability).
What To Do Next?
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JCI shares were trading at $70.95 per share on Wednesday afternoon, down $0.50 (-0.70%). Year-to-date, JCI has gained 24.47%, versus a 18.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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