A highly anticipated $1.20 trillion infrastructure stimulus package is currently being debated in Congress. Despite a recent setback when the bill failed to secure votes in the Senate, 22 Democratic and Republican senators expect to release an approved package soon. Approximately $579 billion of the total stimulus package is expected to fund the construction of roads, bridges, and broadband infrastructure nationwide.
In addition, President Biden has floated a $3.50 trillion budget resolution bill proposal that focuses on social and environmental factors, including hefty investments in the clean energy space, which was previously cut from the infrastructure package. Senate Majority Leader Chuck Schumer expects this budget blueprint to “allow us to pass the most significant legislation to expand, support and help American families since the New Deal...This is generational, transformational change to help American families who need the help in this rapidly changing world.”
Wall Street analysts expect these “once-in-a-generation” investment packages to revolutionize the country’s infrastructure. Furthermore, the growth potential of construction material companies is likely to attract investor attention soon. Consequently, analysts expect popular infrastructure stocks Rio Tinto Group (RIO), Astec Industries, Inc. (ASTE), and Columbus McKinnon Corporation (CMCO) to rally by 20% or more in the near term.
Click here to check out our Infrastructure Sector Report for 2021
Rio Tinto Group (RIO)
Headquartered in London, RIO explores for, mines, and processes mineral resources worldwide. The company operates through four segments—Iron Ore, Aluminum, Copper & Diamonds, and Energy & Minerals. It also owns and operates open pit and underground mines, mills, refineries, smelters, power stations, and research and service facilities.
On July 8, 2021, RIO and POSCO, one of the world’s leading steel producers, signed a memorandum of understanding (MoU) to jointly explore, develop and demonstrate technologies to transition to a low-carbon emission steel value chain. By integrating RIO’s iron ore processing technology and POSCO’s steel making technology, the companies will commit to identifying ways to reduce emissions across the steelmaking process and reach net-zero carbon emissions by 2050.
In an announcement dated June 22, RIO said it will deploy the world’s first fully autonomous water trucks at its $2.6 billion Gudai-Darri iron ore mine in Western Australia’s Pilbara region. The new vehicles, which are primarily used for dust suppression on-site, will enhance productivity by enabling mine operations to track water consumption and reduce waste digitally.
For its fiscal year ended December 31, 2020, RIO’s consolidated sales revenue increased 3.3% year-over-year to $44.61 billion for its fiscal year ended December 31. The company’s operating profit increased 46.8% year-over-year to $16.83 billion. RIO net earnings came in at $9.77 billion for the year, up 22% from the prior year. Its EPS increased 23% year-over-year to $5.99.
A $16.30 consensus EPS estimate for the current year represents a 111.8% rise from the prior year. In addition, analysts expect the company’s revenue to increase 48.9% for the current year to $66.42 billion.
The stock has gained 38.9% over the past nine months and closed Friday’s trading session at $82.77. The $101.92 average price target indicates a potential 23.1% upside. RIO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value, Sentiment, and Stability. To see additional POWR Ratings for RIO’s Growth, Quality, and Momentum, click here.
RIO is ranked #3 of 38 stocks in the Industrial - Metals industry.
Astec Industries, Inc. (ASTE)
ASTE designs, engineers, manufactures and markets equipment and components used primarily in road building and related construction activities internationally. ASTE is based in Chattanooga, Tenn.
In May, ASTE launched a new modern look with a rebranding initiative to coincide with its business model. Combining its subsidiary companies to operate under the name ASTEC going forward, the organization hopes to offer better customer service, improve efficiency and drive innovation.
On May 13, ASTE launched the new Astec Versa Jet burner designed to offer several advantages for retrofit customers. The burner provides a versatile platform that permits quick setup and can fire at a range of rates, and can be easily configured to meet production needs, the option to reuse an existing fuel train, and compatibility with virtually all drum designs. Using less energy than other comparable burners, ASTE hopes to gain good sales for the burner in the coming months.
ASTE’s net sales came in at $284.40 million for its fiscal first quarter ended March 31, 2021, representing a 19.1% improvement sequentially. The company’s non-GAAP gross profit came in at $68.50 million, up 20.4% from the prior quarter. As of March 31, 2021, ASTE had $164.60 million in cash and cash equivalents.
Analysts expect ASTE’s EPS to improve 170% year-over-year to $0.54 for its current quarter, ending September 30, 2021. The stock surpassed the Street’s EPS estimates in three of the trailing four quarters. The $285.13 million consensus revenue estimate for the current quarter represents a 23.2% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 10% per annum over the next five years.
ASTE has rallied 30.7% over the past year and ended Friday’s trading session at $59.40. Wall Street analysts expect the stock to hit $82 in the near term, which indicates a potential 38.1% upside. Both Wall Street analysts that rated the stock rated it ‘Buy.’
ASTE’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has a B grade for Value, Growth, and Quality. In addition to the grades we’ve just highlighted, one can see ASTE’s ratings for Stability, Momentum, and Sentiment here.
ASTE is ranked #32 of 84 stocks in the A-rated Industrial - Machinery industry.
Click here to check out our Industrial Sector Report for 2021
Columbus McKinnon Corporation (CMCO)
CMCO in Amherst, N.Y. designs, manufactures, and markets intelligent motion solutions to ergonomically move, lift, position, and secure materials worldwide. The company’s products are offered to end-users directly and through distributors, independent crane builders, material handling specialists and integrators, government agencies, original equipment manufacturers, and engineering procurement and construction firms.
On April 7, 2021, CMCO completed its acquisition of Dorner Manufacturing Corporation, a provider of conveyor automation solutions. By providing a new platform in the specialty conveying space with this acquisition, CMCO hopes to significantly advance its growth objectives and strategy to broaden expertise in intelligent motion solutions for material handling and provide it with access to high-growth secular markets.
CMCO’s net sales revenues came in at $186.24 million for its fiscal fourth quarter, ended March 31, 2021, representing an 11.8% improvement sequentially. The company’s non-GAAP gross profit increased 15.3% from the prior quarter to $64.35 million. CMCO’s non-GAAP income from operations has been reported at $18.87 million for the quarter, up 69.2% from the prior quarter. While its non-GAAP net income increased 97.3% year-over-year to $12.18 million, its non-GAAP EPS increased 92.3% year-over-year to $0.50. The company had 202.13 million in cash and cash equivalents of $as of March 31, 2021.
Analysts expect the stock’s EPS to improve 84.9% year-over-year for the current quarter, ending September 30, 2021, to $0.63. The $224.52 million consensus revenue estimate for the current quarter represents a 42.3% rise from the prior year period.
CMCO has gained 31.2% over the past year and 18.4% over the past nine months. It closed Friday’s trading session at $44.55. All four Wall Street analysts that have rated the stock rated it a ‘Buy.’ The $69 average price target indicates a potential 54.9% upside .
CMCO’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
The stock also has a B grade for Growth and Value. Click here to see the additional POWR Ratings for CMCO (Momentum, Quality, Stability, and Sentiment).
CMCO is ranked #23 of 84 stocks in the A-rated Industrial - Machinery industry.
Click here to check out our Infrastructure Sector Report for 2021
RIO shares were trading at $86.02 per share on Monday afternoon, up $3.25 (+3.93%). Year-to-date, RIO has gained 19.65%, versus a 18.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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