Image Source: PexelsConstruction spending from the federal infrastructure spending bill passed in 2021 is expected to increase substantially in the coming years, and that’ll be a boon for Eagle Materials (EXP). The Dallas-based firm produces both heavy and light construction materials, including concrete, construction aggregate, gypsum, wallboard, and sand for hydraulic fracturing, notes Mike Cintolo, editor of Cabot Top Ten Trader.In this market, most of the “extended” leaders — and by that we mean names that have been running for three-plus months without any rest or pullback — are being tested. More than a few are wobbling and zeroing in on intermediate-term support, and same are already cracking.Meanwhile, some of my favorite names recently mostly live outside of the tech arena. Many have recently taken off, and some are pulling into areas of support.That brings me to Eagle Materials. It expects to benefit from the spending trends highlighted above – as well as from what it sees as a long-term tailwind in private non-residential spending.
What’s more, Eagle expects an additional boost from increased heavy industrial projects focused on computer, electric, and the onshoring of semiconductor manufacturing as a result of many subsidies and incentives included in the CHIPS and Inflation Reduction Acts of 2022.Against this favorable backdrop, half of Eagle’s markets have recently implemented price hikes, with the other half to increase prices in April. In fiscal Q3 (ending December), revenue of nearly $560 million increased 9% from a year ago, with earnings of $3.72 per share up 165%, topping estimates by 17 cents.The solid results were led by an 18% rise in the firm’s Heavy Materials segment (concrete, cement, and aggregates), due mainly to higher cement sales, plus higher aggregate sales volume and record concrete pricing (up 13%). Eagle’s gypsum wallboard business continues to benefit from a long-tail construction backlog that has kept demand steadier than expected in its key domestic markets.My recommended action would be to consider buying shares of EXP.
About the Author
During his more than ten years at Cabot, Michael Cintolo has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides, which has helped Cabot place among the top investment newsletters numerous times. Cabot Growth Investor has been consistently recognized for outstanding performance by Hulbert Financial Digest and Timer Digest. It is one of Hulbert’s top five newsletters for five-year risk-adjusted performance with a 13.2% annualized return as of June 30, 2011. It is also ranked among the Top Ten Newsletters by Timer Digest for long-term performance.More By This Author:Could Cash-Secured Puts Pad Your Income And Get You Stocks At A “Discount”? Sempra: A “Pick And Shovel” Income Stock Set To Capitalize On AI BoomIBIT: A Spot Bitcoin ETF Whose AUM, Price Is Surging
