3 Stock Picks to Profit From the Factory Construction Boom

Stocks to buy

The spending on building factories in the U.S. is booming, as such outlays came in at about $200 million each month from May to September, according to the Federal Reserve. Conversely, in 2019, only about $80 million per month was spent building factories in America. This has led to the rise of stocks to buy to take advantage of the factory construction boom.

In a July article, The Wall Street Journal attributed the factory construction boom to the renewable energy tax breaks and the aid for semiconductor manufacturing companies passed by Congress. While those two laws played a key role in the trend, I think the electric vehicle revolution and the movement towards onshoring more of America’s manufacturing capacity may have contributed to the explosion of spending on building factories. But in any case, multiple companies are profiting handsomely from the trend and will continue to do so for the foreseeable future.

Here are three stocks for those who want to benefit from this development.

United Rentals (URI)

Source: Roman Zaiets/ShutterStock.com

United Rentals (NYSE:URI) rents equipment to “small to mid-sized contractors,” and two of its top-end markets are “construction and utilities.” As a result, it’s well-positioned to benefit from both the current factory construction boom and utilities’ efforts to embrace renewable energy and improve the electric grid amid transportation electrification.

These trends seem to be playing out as URI’s top line jumped 23.6% versus the same period a year earlier last quarter, while its operating income climbed nearly 20% year-over-year to $1.1 billion.

The shares have a very low forward price-earnings ratio of 10.7, making URI stock exceptionally attractive for value investors.

Fluor (FLR)

Source: Kostsov / Shutterstock.com

Fluor (NYSE:FLR) manages the construction of facilities, including factories. The company benefits from the factory construction boom as it recently obtained one deal to build an “ultra-low-carbon hydrogen” plant and another to create ” a sodium-ion battery production facility in…Sweden.”

On Oct. 4, Swiss bank UBS upgraded Fluor to “buy” from “neutral,” citing its underappreciated growth potential. The bank predicted that the company’s EBITDA, excluding certain items, would jump 41% between 2023 and 2025. UBS also expects Fluor’s profit margins to climb during that period.

FLR stock has a very low forward price-earnings ratio of 13.3.

Last quarter, Fluor’s net income jumped to $181 million from a loss of $24 million in Q3 of 2022. The large increase suggests that the company benefits from the factory construction boom.


Source: Shutterstock

Like Fluor, AECOM (NYSE: AECOM) manages the development of buildings, including factories. As a result, the company is well-positioned to benefit greatly from the factory construction boom.

Moreover, the firm’s exposure to the “transportation, water (and), government” sectors leaves it poised to benefit from Washington’s current high spending on infrastructure and subsidizing state and local government spending.

Last quarter, Aecom’s top line climbed 13% versus the same period a year earlier, while its operating cash flow soared 36% versus the same period a year earlier to $279 million. The company’s backlog was a very high $441.6 billion as of the end of June, showing that its business is very large and stable.

The shares have a very low trailing price-sales ratio of 0.8.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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