Infrastructure

6 Construction Materials Companies Could Reap Big Rewards With a President Biden

LafargeHolcim

LafargeHolcim is based in Switzerland and trades on both the Swiss Exchange and Euronext under the symbol LHN and over-the-counter in the United States (HCMLF, HCMLY). The firm’s market cap is around $28 billion, and it operates in four segments: cement, aggregates, ready-mix concrete, and solutions and products. The company employs more than 70,000 people in more than 70 countries.

Like CRH, LafargeHolcim’s cement and concrete businesses are or could become an impediment if environmental concerns force changes in how the materials are made and used.

Shares closed at €41.39 ($48.57) in Paris, nearly 18% below the 52-week high of around $57.20. The stock traded at just 13.7 times expected 2021 earnings.

Weyerhaeuser

Weyerhaeuser Corp. (NYSE: WY) is one of the country’s largest timber and wood products companies. It is also a real estate investment trust (REIT). While timber and engineered wood products are not in great demand for road building and similar projects, Biden has proposed spending $10 billion on buildings and housing in an effort to revitalize some distressed cities and to upgrade and weatherize 2 million American housing units.

Weyerhaeuser’s stock closed at $28.89 on Tuesday, in a 52-week range of $13.10 to $31.58. It is trading about 8.5% below its high and with a potential upside of just over 8% to its consensus price target of $31.22. The shares are a little pricey at 35 times expected 2021 earnings.

Vulcan Materials

Vulcan Materials Corp. (NYSE: VMC) produces and supplies construction materials primarily in the United States. The company’s products include aggregates, asphalt and concrete, all of which are necessary for building and repairing roads and highways. Vulcan’s market cap is near $17.6 billion. When the company reported second-quarter results last week, it beat estimates on both the top and bottom lines.

The company’s shares closed Tuesday at $133.24, in a 52-week range of $65.56 to $152.49, and trading about 12.6% below the 52-week high. The implied upside to the price target of $138.95 is 4.3%, and the stock trades at around 27 times expected 2021 earnings.

Martin Marietta

Another natural resource-based building materials company, Martin Marietta Inc. (NYSE: MLM) supplies aggregates and heavy building materials to the construction industry. The company’s market cap is $14.1 billion, and its pipeline of new projects in Texas and Florida total $7.1 billion and $9.0 billion, respectively. Profitability in the first half of 2020 was the company’s best ever and led to a rise of more than 10% in the share price.

Shares closed at $225.55 on Tuesday, in a 52-week range of $135.08 to $281.82. With a price target of $245.41, the stock’s potential upside is 8.8%, and it trades at 20% below its 52-week high. With expected earnings of $10.03 per share in 2021, the stock trades at a multiple of about 22.5. Martin Marietta pays an annual dividend of $2.20 (yield of 0.98%).

Nucor

Nucor Corp. (NYSE: NUE) manufactures and sells steel, steel products and raw materials. In addition to steel sheets and bars, the company’s products division also manufactures steel joists and girders, decking and a variety of other products for the nonresidential construction industry. The steelmaker is another materials company that blew past second-quarter estimates on the strength of demand in the nonresidential construction sector, a trend the company expects to continue into the third quarter.

Shares closed at $45.41 on Tuesday. At that price, the stock trades slightly above its price target of $45.33, but nearly 23% below its 52-week high of $58.70. The 52-week low is $27.53. Based on expected earnings per share of $2.82 in 2021, the stock’s multiple is around 16. Nucor pays a dividend of $1.61 (yield of 3.49%).

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