American Society of Civil Engineers 2021 Infrastructure Report Card

Many things are very different in the 2024 election cycle. One standout issue not being discussed endlessly is the ailing U.S. infrastructure. We all know the infrastructure needs serious attention. Issues like illegal immigration, taxes, the future of democracy, abortion, and who gets what in handouts are all more pressing to voters. Infrastructure just isn’t a sexy topic for politicians compared to all the other issues.

Wall Street always tries to handicap how infrastructure investing will look in the years ahead based on political promises. Infrastructure projects have been front and center at the local level and hundreds of billions have been earmarked and committed to for projects already underway and for future projects.

This is still a time when America’s roads, airports, dams, bridges, levees, waterways, ports, waste facilities, electric lines (and sources) and even water infrastructure all need serious help.

HOW MUCH $$$ TO FIX U.S. INFRASTRUCTURE?

Citigroup has released an update on its favorite infrastructure players. They are not on the manufacturing side, but on the services, engineering and construction sides of the infrastructure equation. This is one of the areas where tactical investors may look to juice their returns from their non-tech portfolio looking a year or more into the future. Just keep in mind that Citi’s higher price targets are coming at a time when each of these stocks has performed well in 2024 (YTD) and are closer to (or challenging) their 52-week highs.

Before getting into Citi’s top picks for infrastructure services, do not forget about the “C-” grade in 2021 for U.S. infrastructure issued by the American Society of Civil Engineers (ASCE). A new report will be published in 2025, but the ASCE in 2021 was an improvement from the prior “D” grades that had been awarded in prior report cards. In 2017, the projection to fix America’s infrastructure was $4.59 trillion over the next 10 years. According to the 2021 ASCE report card:

We’re still just paying about half of our infrastructure bill – and the total investment gap has gone from $2.1 trillion over 10 years to nearly $2.59 trillion over 10 years.

CITIGROUP’S TOP PICKS

Citi’s Andrew Kaplowitz sees further upside to the firm’s preferred engineering and construction names. The firm sees continued healthy end market demand trends and “ongoing self-help initiatives” coinciding to support earnings growth. Citi also noted that earnings visibility remains reasonably elevated for most of the players in this group heading into earnings season.

So, let’s get down to Citigroup’s top picks in the engineering and construction part of the infrastructure equation.

Quanta Services, Inc. (NYSE: PWR) remains Citi’s top pick in the sector. Citi reiterated its Buy rating and earlier in October raised its target price up to $348 from $302. Quanta’s share price was last seen at $314.00 and its 52-week range is $153.74 to $317.91. Quanta’s stock was last seen up 45% YTD and it’s up about 90% versus this time last year. Quanta’s consensus analyst price is about $314.

AECOM (NYSE: ACM) is also one of Citi’s top picks in the sector. It was reiterated with a Buy rating and its price target was raised to $128 from $110. Its share price was last seen at $106.25 and its 52-week range is $74.40 to $108.26. AECOM shares have risen 15% YTD and 36% from a year ago. AECOM’s consensus analyst price target is about $111.

MasTec, Inc. (NYSE: MTZ) was reiterated with a Buy rating and its price target was raised to $150 from $122. Its share price was last seen at $126.50 and its 52-week range is $44.65 to $130.22. MasTec shares are up 67% YTD and 106% versus a year ago. MasTec’s consensus analyst price target is about $134.

Jacobs Solutions Inc. (NYSE: J) was reiterated with a Buy rating and its prior $138 price target was raised up to $166 in Citi’s call. Jacobs was last seen trading at $142.50 and its 52-week range is $100.84 to $144.56. Its stock is up 31% YTD and up 29% from a year ago, and Jacobs’ consensus price target is about $143.

KBR, Inc. (NYSE: KBR) was also reiterated as Buy and Citi’s price target was raised up to $82 from $76. KBR was last seen trading at $71.00 and its shares have traded in a range of $49.37 to $71.31 in the last 52-weeks. This stock is up 28% so far in 2024 and its gain in the last year is about 20%. KBR has a consensus analyst price target of $78.

Fluor Corporation (NYSE: FLR) was raised to Buy from Neutral and its price target was raised to $65 from $52 in the Citi call. Fluor shares were trading at $53.75 and its 52-week range is $32.31 to $55.86. Its stock has risen 37% YTD and 55% over the last year. Fluor’s consensus analyst price target was last seen at $54.67.

DISCLAIMER & REMINDERS

The opinions and views in this report were taken from Citigroup’s research summaries. This report is incomplete and may have missed other aspects of the full research call. These views and ratings are not from Tactical Bulls. Tactical Bulls does not have any formal ratings and price targets on any of the companies mentioned in this report.

Tactical Bulls will again remind its readers (and all investors) that no single analyst report, no matter how much optimism and upside are offered, should ever be used as the sole basis to buy or sell a stock. That decision to buy, sell or hold is up to each investor and the decision should be made with a financial advisor.