Stocks to buy

The Top 3 Infrastructure Stocks to Buy in March 2024

The U.S. is undergoing an infrastructure boom, with projects across multiple states. This construction boost will spur a multi-year growth cycle in these top infrastructure stocks to buy.

Over the years, concerns have reigned about the country’s aging infrastructure. In November 2021, President Joe Biden signed the Infrastructure Investment and Jobs Act (IIJA) to address this challenge. The law has spurred multiple projects across different states. To date, over 46,000 projects have been awarded funding.

These include advanced rapid transit corridors, harbors, water systems, bridges, airports, railway tunnels, fiber broadband, and ports. With $1.2 trillion authorized for spending, the top infrastructure stocks to buy will capture a slice of this spending. These enterprises are just getting approved and several years of spending will ensue as implementation occurs.

The following three companies are highly exposed to infrastructure spending in the U.S. They provide the materials and equipment needed to rebuild America’s intricate, supporting systems.

Quanta Services (PWR)

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Quanta Services (NYSE:PWR) is a leading infrastructure solutions provider. The company builds, upgrades and maintains electric power, renewable energy and underground utility projects for customers. Over the years, it has developed a deep expertise in these specialty areas, and its customer relationships span decades.

Today, Quanta Services is the go-to infrastructure solutions provider. Customers include electric utilities like American Electric Power (NASDAQ:AEP), renewable energy companies like NextEra Energy (NYSE:NEE) and telecoms such as AT&T (NYSE:T). Considering the breadth of services and the ongoing IIJA-funded projects, it’s one of the top infrastructure stocks to buy.

The company has just closed 2023 with an impressive financial report. Specifically, it achieved revenues of $20.88 billion, representing 22% growth. In addition, the company backed up its solid revenue growth with profitability, earning adjusted EBITDA of $1.95 billion. And notably, 2023 was the seventh consecutive year of record adjusted diluted EPS.

Heading into 2024, management sees incredible momentum in infrastructure projects. Also, the company closed 2023 with a backlog of $30.11 billion. And, management expects further contract awards in the back half of 2024.

Going forward, Quanta Services is well-positioned for the years of much-needed infrastructure spending. It’s no secret that America’s infrastructure is crumbling and needs rebuilding. The IIJA is just the start, and Quanta will benefit from years of infrastructure investment.

Vulcan Materials (VMC)

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Aggregates – crushed stone, sand and gravel – are a key ingredient in almost all infrastructure projects. Therefore, titans of the aggregate industry, like Vulcan Materials (NYSE:VMC), will be significant beneficiaries of the IIJA.

So, what makes Vulcan Materials one of the top infrastructure stocks to buy? First, it is the largest producer of construction aggregates in the U.S. Notably, the company holds the number one or two position in over 90% of its markets.

Secondly, the bulky nature of aggregates makes it an extremely localized business. It is expensive to haul aggregates over long distances since most deliveries are done by truck. According to this U.S. Geological Survey Report, aggregates are typically used in projects within 50 miles of a quarry site. These dynamics favor a large producer like Vulcan Materials with local quarries.

As of Dec. 31, 2023, it had 397 aggregate facilities across the U.S. Although the company supplies concrete and asphalt, aggregates are the main product, accounting for 89% of gross profit. Aggregate demand is resilient, with total revenues growing by 31% and 6% in 2022 and 2023, respectively.

Lastly, the industry has attractive pricing dynamics with zoning and permitting regulations limiting new quarries. As of this writing, Vulcan Materials has over 15.6 billion tons of probable and proven aggregate reserves. Thus, as infrastructure spending booms, VMC stock will continue to soar.

Caterpillar (CAT)

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Building infrastructure requires equipment. Construction machinery and equipment giant Caterpillar (NYSE:CAT) is already benefiting from increased infrastructure spending. After all, its mining equipment is necessary to extract raw materials like copper and aggregates. And on project sites, equipment like its earth movers and generators are needed.

Despite all the chatter about macro headwinds and China’s economic challenges, CAT stock is near all-time highs. The strength speaks to the robust demand from U.S. infrastructure projects that has compensated for the falling Chinese demand.

After a record-breaking financial year, the prospects for the equipment company are bright. A quick look at 2023 results reveals the impressive performance. Full-year sales were $67.1 billion compared to $59.4 billion in 2022, representing 13% growth. Higher sales of equipment to customers in various end markets drove this demand.

Even better, management continued with its operational improvements. Operating profit margin expanded from 13.3% in 2022 to 19.3%. Also, adjusted profit per share saw a material improvement, growing from $13.84 in the prior year to $21.21.

Lastly, Caterpillar’s shareholder returns make it one of the top infrastructure stocks to buy. Last year, it returned $7.5 billion to shareholders via dividends and buybacks. As of this writing, it yields 1.54% and has a 30-year dividend growth record. Caterpillar’s growth momentum seems unstoppable after its best year in its 98-year history. Therefore, more infrastructure spending means higher demand for mining and construction equipment.

On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Charles Munyi has extensive writing experience in various industries, including personal finance, insurance, technology, wealth management and stock investing. He has written for a wide variety of financial websites including Benzinga, The Balance and Investopedia.

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