Martin Marietta Materials (MLM), Vulcan Materials (VMC), Granite Construction (GVA), United Rentals (URI) and Wabtec (WAB) are all in or near buy areas as they stand to benefit from a proposed $1.2 trillion infrastructure deal. The package includes substantial added investments in roads, bridges and railways.
President Joe Biden reached a tentative infrastructure deal on Thursday with a group of 21 senators, including 11 Republicans. If it passes, the increased spending will occur over several years.
GVA stock broke out Friday, though it closed just below the buy point, while MLM stock is above an early entry. Vulcan Materials, United Rentals and Wabtec stock are all close to a buy point or aggressive entry.
Watsonville, Calif.-based Granite Construction is involved in the construction and rehabilitation of roads, bridges, rail lines, airports and marine ports.
The company snapped up a series of contracts in June. On June 24, Granite was awarded a $16 million contract to rehabilitate the Anchorage International Airport in Alaska.
On June 23, it won a contract for a $20 million bike trail project in central California. And on June 17, Granite was awarded a $44 million contract to install a multi-modal transportation system in Reno, Nev.
GVA stock broke out past a buy point of 42.52 from a flat base on June 25, according to MarketSmith chart analysis, though it faded into the close. Granite Construction stock rose 1.65% to 42.45, just below the buy point after hitting 44.31 intraday. But shares surged 12.2% for the week. The buy zone extends to 44.65.
Investors could have bought GVA stock on Thursday, when the infrastructure deal was announced. Granite Construction rebounded from its 50-day line and broke a downward-sloping trend line.
GVA’s relative strength line hit a new high and is trending upward. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
Granite paid a $66 million fine in the quarter to settle a lawsuit with investors tied to the restating of financials in the heavy civil group segment of its business.
Martin Marietta is a leading supplier of building materials, including aggregates, cement, ready mixed concrete and asphalt. It operates in 26 states, Canada and The Bahamas.
The official buy point for MLM stock is 383.81 from a cup base. But shares broke a trend line as it nudged past the 50-day line on the infrastructure deal, rising 7.3% to 359.93 for the week. Those moves create an early buying opportunity.
MLM’s relative strength line is trending up. Its RS Rating is a 76, while its EPS Rating is 96.
On April 30, Martin Marietta bought Minneapolis-based Tiller Corp., broadening its geographic reach. Terms of the deal were not disclosed.
Martin Marietta CEO Ward Nye said in a statement at the time he expected the acquisition to be immediately accretive to earnings and cash flow, and contribute $170 million of product revenues and $60 million of adjusted EBITDA for 2021.
Davidson research analyst Brent Thielman in a May 5 report said more acquisitions are in store.
“Expected (free cash flow) after dividends of $475 million and $515 million in 2021 and 2022 and available liquidity lend optionality, and we anticipate a more aggressive growth strategy ahead,” he wrote.
On May 24, North Carolina-based Martin Marietta announced that it has entered into a definitive agreement to acquire Lehigh Hanson West Region business for $2.3 billion in cash.
The acquisition includes 17 aggregates quarries and two cement plants.
“Following the closing, Martin Marietta will have a coast-to-coast geographic footprint with expanded product offerings,” CEO Nye said.
Birmingham, Ala.-based Vulcan Materials is among the largest domestic heavy building companies. It produces construction aggregates, asphalt mix and ready-mixed concrete primarily in the U.S. The company also supplies crushed stone, sand and gravel, and related products and services.
VMC stock has a 194.27 buy point from a flat base. Shares rose 7.2% to 177.81 last week, but hit resistance at their 50-day line on Friday. A move above that key level would offer an early entry for VMC stock.
Vulcan Materials’ earnings per share popped 47% in Q1. Gross margins were 21.5% vs. 19.2% in the year-ago quarter. But Davidson analyst Thielman remains cautious on margins as petroleum input costs rise from low 2020 levels.
“Management anticipates $25 million in diesel cost headwinds as they progress through 2021,” he wrote in a May 5 report. “Much remains to still play out this year, including pandemic/ owner capital investment decisions, energy cost inflation, public sector recovery and (as typical) weather.”
Earlier this month, Vulcan Materials agreed to buy U.S. Concrete (USCR) for $1.29 billion.
United Rentals leases out equipment to construction and industrial companies, manufacturers, utilities and consumers, among others.
URI stock has been consolidating since May 10, when it hit a 52-week intraday high of 354.60. That gives it an official buy point of 354.70. But a trend line offers an early entry right above the 50-day line. United Rentals stock reversed lower from that area on Friday, but climbed 8.2% for the week.
URI’s relative strength line is ticking up. Its RS Rating is 84, while its EPS Rating is 73.
United Rentals reported Q1 EPS of $3.45, up 3% from the year-ago quarter, while revenue slipped 3% to $2.06 billion. But CEO Matthew Flannery gave a rosy outlook for the rest of the year.
He sees revenue between $9.05 billion-$9.45 billion, vs. a prior outlook for $8.63 billion-$9.03 billion. Adjusted EDITDA is also seen improving to $4.1 billion-$4.3 billion vs. a previous estimate for $3.925 billion-$4.125 billion.
Pittsburgh-based Westinghouse Air Brake Technologies, commonly known as Wabtec, provides equipment, systems and related services to the rail industry.
WAB stock rose above a buy point of 84.80 from a double-bottom base, climbing 6.7% to 82.91 last week.
Its relative strength line is trending up. But WAB stock’s fundamentals could be better. Its RS Rating is a mediocre 59, while its EPS Rating is 45.
While sales and earnings have slid in recent quarters, FactSet analysts expect an improvement in the second half of 2021. As a result, they see Wabtec EPS of $4.20 for 2021, an 11% increase from 2020. Sales are seen notching a 4% gain to $7.84 billion.
Investors also could play the bipartisan infrastructure deal via an ETF. The Global X U.S. Infrastructure Development ETF (PAVE) rallied 4.65% last week. But, like United Rentals and VMC stock, it hit resistance at its 50-day line on Friday. A move above the 50-day line would also break a trend line, providing a couple of reasons for an early entry.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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