If there was one word that could be used to describe the 2016 presidential election, perhaps “tension” is about as close as you can get. With the lines shifting between whether it will be President Trump or President Clinton being blurred again in recent days, the reality is that the public has been told repeatedly that they will get hundreds of billions of dollars worth of infrastructure spending in the coming years.
24/7 Wall St. has been focusing on companies that can survive and thrive under either candidate. Here, six companies are featured from multiple analysts on Wall Street that should be infrastructure spending winners in the coming years.
Before getting too hooked on a share price today, and before worrying about how these will perform during just this one earnings season, please understand that these picks are viewed favorably by 24/7 Wall St. and by recent analyst reports for an outside view.
The American Society of Civil Engineers has recently given the United States a failing grade for its infrastructure. Its view is that $3.6 trillion would be needed to raise the standard of America’s roads and infrastructure to acceptable levels before 2020 — and neither candidate has offered up anything that grandiose.
Many other infrastructure stocks have been named elsewhere as would-be spending winners. The problem is that many stocks are close to multiyear or all-time highs. 24/7 Wall St. wanted to look for stocks wherein the consensus analyst target was higher or where at least two major analyst calls were extremely bullish in recent days or weeks.
Again, these are not short-term calls based around the election. They feature companies that should do fine in the quarters and years ahead, once the election is over and life can resume without everyone fighting over their presidential hopes.
Caterpillar Inc. (NYSE: CAT) will be a big winner if serious infrastructure spending begins to take off again. Maybe this won’t be in its major mining equipment sales in the United States or emerging markets, but Caterpillar already benefits from construction spending. Numerous analyst upgrades have been seen around this strategy, and this is the best performing Dow Jones Industrial Average stock of 2016, despite not seeing a sales recovery take place yet.
Goldman Sachs recently gave Caterpillar a major upgrade to Buy from Neutral with a $112 price target on October 11. The prior close was $88.22, but shares have pulled back to $83.50 after earnings. The consensus analyst target price was $77.37 mid-month and has now risen to $80.50. Goldman Sachs has the highest analyst target of all now, based on margin expansion and an earnings recovery much greater than investors have expected.
AECOM (NYSE: ACM) may operate all around the world, but Credit Suisse believes that its engineering services would benefit from large infrastructure projects, and the firm thinks it is already a good at cash generation with lower energy exposure than some peers. The 2014 URS acquisition is also helping, and AECOM trades at only about 8 times expected 2017 earnings as is. Credit Suisse had a $36 price target in September.
UBS recently projected 20% organic earnings per share growth for AECOM in 2017, reiterating its Buy rating and $37 price target. That is based on 11 times the $3.40 per share earnings target for 2018.
With shares at $27.84 now, AECOM’s 52-week trading range is $22.80 to $36.30, and it has a consensus price target of $34.67. One final note: AECOM has a history of mixed results, and it is currently under several class action suit investigations.
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