This story was originally published here.
U.S. infrastructure is a slow-motion train wreck, which has generally left many infrastructure stocks off of investors’ radars lately.
In fact, the American Society of Civil Engineers gave the U.S. a D+ rating as recently as 2017. Additionally, the ASCE estimates that the country needs around $4.5 trillion by 2025 just to repair roads, airports, bridges, dams, schools and more, as I noted in February 2020.
Worse, according to the group, the U.S. is significantly under-invested by $2 trillion.
Between 2003 and 2017, spending on roads, bridges and water systems to name a few, fell by more than 8%, according to the Congressional Budget Office. According to the ASCE, “[t]oday, we only spend 2.5% of our GDP on infrastructure, down from 4.2% in the 1930s.”
The organization expands on the issue further, explaining the following:
“Unfortunately, the real-world impacts of this underinvestment are all around us. Every day, there are 850 water main breaks in North America, a 27% increase over the past six years. The average driver spends $533 annually in extra vehicle repairs and operating costs as a result of poor roadway conditions and insufficient capacity.”
While the U.S. government has been slow to act, there’s hope for improvement.
President Trump, for example signed an executive order to expedite infrastructure investments on June 4, 2020. House Democrats have also rolled out a $500 billion infrastructure bill that would help update our aging transportation system.
With hopeful updates to our antiquated infrastructure, some of the best stocks to consider:
Infrastructure Stocks to Buy: Vulcan Materials (VMC)
Vulcan Materials is one of the companies that produces and sells construction aggregates, asphalt mix and ready-mixed concrete primarily in the U.S. for highways, airports and government buildings.
After pulling back on the coronavirus threat, the stock has exploded from a low of $65.34 to $123. However, with new infrastructure initiatives being launched, I believe VMC stock could revisit its prior high of $148 shortly. Plus, demand for concrete is expected to grow 7% this year to $4 billion, according to Concrete Construction.
In Vulcan Materials’ most recent quarter, the company saw $1.05 billion in revenues, as compared to $996 million, year over year. Net earnings were $60 million with EBITDA of $201 million.
In addition, according to Tom Hill, chairman and CEO:
“The impact from the COVID-19 global pandemic continues to evolve quickly, and it is too early to estimate accurately the full-year impact on aggregates demand. Because we have been designated as an essential business, shipment activity today remains relatively strong across many of our markets as customers execute on their backlog of projects. However, we expect some project timelines will be modified as every market adjusts to economic disruptions.”
Whatever happens in light of the novel coronavirus crises, I have faith that VMC stock will ultimately be a stand out among other infrastructure stocks in the months ahead.
Editor's Note: Click here for the other two infrastructure plays.
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