Last month, the U.S. Senate approved a $1-trillion infrastructure bill that aims to rebuild roads and bridges in the United States, fund environment-friendly initiatives, and revamp utilities, including high-speed Internet and power infrastructure.
Using the TipRanks stock Screener, let’s look at some infrastructure stocks across the above areas that could stand to benefit.
I am neutral about all the stocks mentioned in this article.
Deere & Company (DE)
Deere is an agricultural, construction, and forestry manufacturer that could stand to benefit immensely from the infrastructure boost in the United States.
In Q3 of its Fiscal Year 2021, the company posted net sales of $11.53 billion, up 29% year-over-year, topping the Street’s estimate of $10.3 billion.
Earnings came in at $5.32 per share, a jump of 107% year-over-year, beating expectations of $4.57 per share. (See Deere stock charts on TipRanks)
In FY21, Deere expects net income in the range of $5.7 billion to $5.9 billion.
John C. May, chairman and CEO said, “Looking ahead, we expect demand for farm and construction equipment to continue benefiting from favorable fundamentals.”
The company anticipates full-year net sales to grow by 25%-30% for its Production & Precision Agriculture segment, by around 25% for its Small Agriculture & Turf segment, and by around 30% for its Construction & Forestry segment.
Following the Q3 results, Robert W. Baird analyst Mircea Dobre reiterated a Buy rating and a price target of $425 on the stock.
Turning to the rest of the Street, analysts are cautiously optimistic about Deere, with a Moderate Buy consensus rating, based on three Buys, one Hold, and one Sell.
The average DE price target of $407.20 implies 5.8% upside potential from current levels.
Plug Power (PLUG)
Plug Power provides hydrogen and fuel cell product solutions.
PLUG earns revenues mainly from the sales of fuel cell systems, power purchase agreements (PPA), services performed on fuel cell systems, and related infrastructure. (See Plug Power stock charts on TipRanks)
In Q2 of the company’s FY2021, net revenue rose 83.2% year-over-year, to $124.6 million. Notably, gross billings were $126.3 million, compared to $72.4 million last year.
However, PLUG’s losses widened to $0.18 per share, from a loss of $0.03 in the same period a year ago. Analysts were expecting of a loss of $0.08 per share.
Evercore ISI analyst James West remains concerned about the company’s near-term unprofitability. However, according to the analyst, what matters most to the stock’s valuation “is the pipeline of commercial developments and ability to achieve 3-5% market share in what could be a $300B hydrogen market in 2030.”
The analyst has a Buy rating and price target of $42 on the stock.
Turning to the rest of the Street, analysts are cautiously optimistic about Plug Power, with a Moderate Buy consensus rating, based on 12 Buys, five Holds and one Sell.
The average Plug Power price target of $41.06 implies 51.2% upside potential from current levels.
Union Pacific Corp. (UNP)
Union Pacific is a freight railroad company, and Class I railroad operating in the United States. It owns 32,313 route miles, connecting Pacific Coast and Gulf Coast ports with the Midwest and Eastern U.S. gateways, while providing several corridors to key Mexican gateways.
Revenues came in at $5.5 billion for UNP in Q2, a jump of 30% year-over-year. The increase in revenues was due to a surge in freight revenues which increased 29.2% to $5.1 billion.
EPS came in at $2.72 per share, up 62.9% year-over-year, topping analysts’ expectations of $2.40 per share. (See Union Pacific stock charts on TipRanks)
The company reported an operating ratio of 55.1%, which improved by 590 basis points year-over-year.
According to Cowen analyst Jason Seidl, the company’s operating ratio in Q2 indicated that “UNP was better able to manage its profitability in the quarter compared to some other Class Is that have reported (KSU, CNI), as net productivity has continued through 1H21 ($235MM of net productivity gains in 1H21).”
The analyst is bullish on UNP with a Buy rating, and raised his price target from $238 to $239.
Turning to the rest of the Street, analysts are bullish about UNP, with a Strong Buy consensus rating, based on 13 Buys and four Holds.
The average Union Pacific price target of $248.18 implies 14.1% upside potential from current levels.
AECOM Technology (ACM)
AECOM Technology is an infrastructure consulting firm that provides planning, architectural and engineering design, consulting, investment and development services, and construction management services.
The company reported revenues of $3.4 billion in fiscal Q3, up 7% year-over-year, and exceeding consensus estimates of $3.23 billion. Adjusted EPS came in at $0.73, better than analysts’ estimates of $0.72.
ACM raised its guidance for the full year, and now expects adjusted EBITDA to range between $810 million to $830 million, while diluted adjusted EPS is projected to range from $2.75 to $2.85. (See Aecom stock charts on TipRanks)
Following the results, Robert W. Baird analyst Andrew Wittman reiterated a Buy rating, but reduced the price target from $81 to $78 on the stock.
The analyst pointed out that design revenues make up 90% of ACM’s profits, and the company’s revenue backlog of $39.7 billion at the end of Q3 “speaks to a healthy pipeline of new opportunities with good funding support; indeed, staffing challenges were a limitation to growth in the quarter, a testament to future opportunity.”
“We see the stock as a steady double-digit compounder (if it sticks to its knitting) with possible modest estimate upside in F2022+ stimulus,” the analyst added.
Turning to the rest of the Street, analysts are bullish about AECOM Technology, with a Strong Buy consensus rating, based on three Buys.
The average AECOM Technology price target of $79.33 implies 19% upside potential from current levels.
Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article.
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