Industrials

What a Biden Presidency Could Mean for the Construction Industry

AECOM

Los Angeles-based EPC firm AECOM (NYSE: ACM) posted 2018 revenue of $11.2 billion, according to Construction Dive. The company’s projects include bridges, sports stadiums, ports and buildings.

In May, the company reaffirmed 2020 guidance for 10% growth in adjusted earnings before interest, taxes, depreciation and amortization and free cash flow of $100 to $300 million. AECOM reportedly has captured about 25% of federal spending on COVID-19 response work.

AECOM’s 52-week price range is $21.76 to $52.40, and shares closed Monday at $38.84. With a price target of $46.44, the implied upside on the stock is about 19.6%, and shares trade at a multiple of around 15 times expected 2021 earnings. The company does not pay a dividend.

KBR

Houston-based EPC company KBR Inc. (NYSE: KBR) has a significant presence in aerospace, defense and energy projects. Although not ranked among the top 10 in revenue, KBR’s 2018 revenue totaled about $5.9 billion.

Last week, the company announced that it is transforming its operating model from three segments to two, Government Solutions and Technology Solutions, folding its Energy Solutions segment into the technology portion of the business.

KBR stock closed at $23.35 on Monday, in a 52-week range of $12.00 to $31.92. The consensus price target is $29.80, implying a potential upside of 27.6%, with shares trading at about 13 times expected 2021 earnings. KBR pays a $0.40 annual dividend (yield of 1.7%).

Granite Construction

Granite Construction Inc. (NYSE: GVA) is based in Watsonville, California, and operates in four construction segments: transportation, water, specialty construction and materials. Late last month, the company completed a review begun in February of its financial reports for 2018 and 2019 and concluded that reports for fiscal 2018 and the first three quarters of last year “could not be relied on.”

In a business update that included some second-quarter 2020 financial information filed on Monday, Granite said it had committed and awarded projects valued at $4.1 billion on its books and that it is executing on its strategy of bidding for smaller projects, which will result in a decline in the overall value of its projects. The company withdrew 2020 guidance in May and has not filed its second-quarter earnings report.

Granite’s stock closed Monday at $19.69, up about 3.6% for the day, in a 52-week range of $8.90 to $37.71. The consensus price target on the stock is $17.75. Shares traded at more than 12 times expected 2021 earnings. The company pays an annual dividend of $0.52 (yield of 2.74%).