Image: BigstockThe Zacks Building Products – Heavy Construction industry has been navigating challenges, such as high interest rates, project delays, labor market competition, and rising costs. While these factors may influence customer decisions and project timelines, the industry’s outlook has remained strong.A robust infrastructure push from the U.S. government has been driving significant growth, with ongoing investments in roads, bridges, broadband, and other critical upgrades fueling demand across key segments like communications, power transmission, and large-scale infrastructure projects.Companies such as EMCOR Group Inc. (EME – Free Report), MasTec, Inc. (MTZ – Free Report), Dycom Industries, Inc. (DY – Free Report), Primoris Services Corporation (PRIM – Free Report), and Orion Group Holdings, Inc. (ORN – Free Report) are well-positioned to seize these opportunities, leveraging their expertise and strategic advantages to thrive in an evolving market.
Industry Description
The Zacks Building Products – Heavy Construction industry consists of mechanical and electrical construction, industrial and energy infrastructure, as well as building service providers. This industry comprises heavy civil construction companies that specialize in the building and reconstruction of transportation projects, including highways, roads, bridges, airfields, ports, and light rail.These companies serve commercial, industrial, utility, and institutional clients. Industry players are engaged in the engineering, construction, and maintenance of communications infrastructure, oil and natural gas pipelines, as well as processing facilities for energy and utility industries. These firms are also engaged in mining and dredging services in the United States and internationally.
4 Trends Shaping the Future of the Heavy Construction Industry
U.S. Administration’s Infrastructural Endeavor: The U.S. administration’s ambitious infrastructure plan, which is aimed at creating modern, sustainable infrastructure and a cleaner future, is set to have significant implications for the economy and the construction industry over the next five years. This comprehensive initiative includes accelerated investments across diverse areas such as roads, bridges, green spaces, water systems, electricity grids, and universal broadband.By laying the groundwork for sustainable growth, the plan seeks to mitigate the effects of climate change and enhance public health, ensuring access to clean air and water. This expansive infrastructure agenda could be a major boost for companies involved in construction and related sectors.Strong Prospects in Telecommunication: The ramp-up of projects related to 5G has been a silver lining for the industry players. The increased demand from telecom customers for wireline networks, wireless/wireline converged networks, and wireless networks using 5G technologies has been benefiting industry players.Construction work for communications is expected to pick up on huge investments in network expansion. Also, the industry is poised to gain from a significant number of project awards across multiple segments, including communications, health care, transmission, and power, along with infrastructural projects in domestic and international markets.Solid Inorganic Moves & Renewable Business Prospects: Acquisitions have been companies’ preferred mode of solidifying product portfolios and leveraging new business opportunities. Again, due to increased renewable project activity and the expansion of services in biomass and other smaller production facilities, the power generation and industrial construction market is poised to see sizable growth.These companies are well-positioned to gain from the renewable energy drive of the pro-environmental Biden administration. The development and deployment of technology solutions across the full spectrum of decarbonization efforts, comprising all facets of infrastructure for providing carbon-free energy solutions, should benefit the companies going forward.Macroeconomic Challenges: The biggest headwinds for industry players are centered around macroeconomic challenges and labor availability. In addition to a tight labor market, a rise in raw material costs is also a concern.Meanwhile, the businesses of the industry players are susceptible to the cyclical nature of the markets in which clients operate and are dependent on the timing and funding of new awards. Hence, volatility in credits and operating risks associated with economic down cycles are pressing concerns.Macroeconomic effects may dampen the near-term execution of some customer plans. A high-interest rate environment could challenge the U.S. heavy construction industry in 2025 by increasing borrowing costs, slowing private sector projects, and dampening demand for commercial and residential construction.
The Zacks Industry Rank Indicates Bright Prospects
The Zacks Building Products – Heavy Construction industry is a nine-stock group within the broader Zacks Construction sector. The industry carries a Zacks Industry Rank #87, which places it in the top 35% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a higher earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since December 2024, the industry’s earnings estimates for 2025 have increased to $7.18 per share from $7.09.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
The Industry Outperforms Sector & the S&P 500
The Zacks Building Products – Heavy Construction industry has performed better than the broader Zacks Construction sector and the Zacks S&P 500 Composite over the past year.Stocks in this industry have collectively gained 81.8% compared with the broader sector’s 10.9% rally. Meanwhile, the S&P 500 has jumped 22.4% in the said period.
One-Year Price Performance
Image Source: Zacks Investment Research
The Industry’s Recent Valuation
On the basis of the forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing heavy construction stocks, the industry has been trading at 19.43 versus the S&P 500’s 22.25 and the sector’s 17.48.Over the past five years, the industry has traded as high as 22.36X, as low as 7.54X, and with a median of 14.46X, as the chart below shows.
Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500
Image Source: Zacks Investment Research
5 Heavy Construction Stocks to Keep an Eye On
Here, we have discussed five stocks from the industry that have solid earnings growth potential.
Primoris Services
Based in Dallas, TX, this is a specialty contractor company operating in the United States and Canada. A robust total backlog level of $11.3 billion (as of the third quarter of 2024) depicts solid momentum going forward.The company remains strategically focused on expanding solar and natural gas power generation while supporting infrastructure development in North America. It positions itself for growth by helping build and maintain power delivery, gas, and communications infrastructure, aiming to meet the rising demand driven by emerging technologies and economic growth.Primoris Services, a Zacks Rank #2 (Buy) rated stock, has rallied 118.6% over the past year. Also, 2025 earnings per share (EPS) estimate has increased to $4.14 from $4.08 over the past 30 days. Earnings for 2025 are expected to grow 19.5% from a year ago. This company surpassed earnings estimates in all the trailing four quarters, with the average surprise being 152.2%.Again, the stock carries an impressive VGM Score of A. This helps to identify stocks with the most attractive value, growth, and momentum.
Price and Consensus: Primoris Services
Image Source: Zacks Investment Research
Orion Group
This company, based in Houston, TX, specializes in providing services for the marine, industrial, and infrastructure concrete industries. This specialty construction company is well-positioned to capitalize on rising market demand for its specialized marine and concrete services, driven by government and private sector funding.Additionally, strong relationships with key contractors enhance its ability to secure contracts, supporting revenue growth. The company’s commitment to debt reduction and margin expansion through operational efficiency further strengthens its financial outlook.Orion Group, sporting a Zacks Rank #3 (Hold) rating, has gained 46.2% over the past year. Earnings for 2025 are expected to grow 366.7% from a year ago. Orion Group surpassed earnings estimates in three of the trailing four quarters and missed on one occasion, with the average negative surprise being 100%. Yet, its three-to-five-year expected EPS growth rate is pegged at 25%.
Price and Consensus: Orion Group
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MasTec
Based in Coral Gables, FL, this is a leading infrastructure construction company operating mainly throughout North America. MasTec has been benefiting from solid performance across the Clean Energy & Infrastructure business, diversified business, strong backlog, and recent acquisitions. It is one of the largest clean energy contractors in the country.The company’s expertise in constructing wind farms, solar farms, biomass facilities, high-voltage transmission lines, substations, battery storage, and hydrogen-enabled solutions positions the company to grow further in this pro-clean energy U.S. administration. MasTec ended September 2024 with a robust $13.9 billion 18-month backlog (up 11% year-over-year), providing strong visibility into 2025.MasTec, carrying a Zacks Rank #3 (Hold) rating, has gained 109.4% over the past year. Earnings estimates for 2025 have increased to $5.53 per share from $5.37 over the past 30 days. Earnings for 2025 are expected to grow 47.4% from a year ago. The stock surpassed earnings estimates in all the trailing four quarters, with the average surprise being 40.2%. Again, it carries an impressive VGM Score of A.
Price and Consensus: MasTec
Image Source: Zacks Investment Research
EMCOR Group
Headquartered in Norwalk, CT, this company provides electrical and mechanical construction and facilities services in the United States. EMCOR has been benefiting from solid execution in the U.S. Construction segment, comprising the U.S. Mechanical and Electrical Construction units, as well as disciplined cost control, project execution strategies, and acquisition policies.The company has been gaining from resilient demand for its services, primarily in high-tech manufacturing, network and communications, manufacturing and industrial, and healthcare, as well as across the EV value chain, which sparked its growth momentum. Also, accretive buyouts have been strengthening its overall results by adding new markets, opportunities, and capabilities.EMCOR, carrying a Zacks Rank #3 (Hold) rating, has surged 93.1% over the past year. Earnings for 2025 are expected to grow 7.2%. EMCOR surpassed earnings estimates in all the trailing four quarters, with the average surprise being 32.3%. It carries an impressive VGM Score of A.
Price and Consensus: EMCOR
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Dycom Industries
Headquartered in Palm Beach Gardens, FL, this is a specialty contracting firm operating in the telecom industry. The company has been leveraging the sustained demand for high-speed connectivity, AI-driven infrastructure expansion, and substantial government funding. Dycom’s growth has been propelled by the increasing need for telecommunications infrastructure.As leading telecom providers accelerate investments in 5G networks and fiber-optic deployment, Dycom has established itself as a key partner in developing these high-speed networks. The surge in fiber-optic installations has been a major contributor to Dycom’s financial success, as reflected in its recent earnings reports.The acquisition of Black & Veatch’s public carrier wireless telecommunications infrastructure business marks Dycom’s largest-ever buyout in the wireless services space, strengthening its capabilities in wireless construction services.Dycom, carrying a Zacks Rank #3 (Hold) rating, has gained 71.9% over the past year. Earnings estimates for fiscal 2026 have increased to $9.32 per share from $9.10 over the past 60 days. Earnings for fiscal 2026 are expected to grow 14.3% from a year ago. The stock surpassed earnings estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 16.6%.
Price and Consensus: Dycom Industries
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