In this article, we discuss the 7 best construction stocks to buy according to analysts along with the latest updates and outlook around the industry.
The recent 50 basis point rate cut has given a significant boost to the market and put a lot of industries into focus. The construction industry could also benefit significantly from the cuts as lower interest rates reduce borrowing costs, increase demand for real estate, encourage infrastructure investment, and boost consumer spending. This leads to more construction projects and supports overall growth in the sector.
According to a Research and Markets report, the U.S. construction industry is set to grow by 5.6% in 2024, reaching $1.27 trillion, with a projected annual growth rate of 4.7% through 2028, reaching $1.53 trillion. The growth is supported by government policies focused on infrastructure development and efforts to bring manufacturing back to the U.S. Despite some cost pressures, major projects such as data centers and infrastructure investments are expected to drive industry growth.
Population Shifts and Industry Trends Reshape U.S. Construction Outlook
According to FMI corporation’s 2024 North American Engineering and Construction Outlook: Third Quarter, U.S. construction in 2024 is expected to surpass $2 trillion for the first time, a 6% increase from 2023. However, growth is projected to slow to around 3-5% annually over the next five years.
In residential construction, a mixed trend is emerging, with single-family home construction projected to grow by 7%, while multifamily construction may decline by 25%. Non-residential construction is set for 6% growth, driven by public safety and manufacturing sectors, each seeing over 20% growth. Heavy civil sectors, like power and transportation, are expected to rise by 8%.
The report emphasizes the influence of population shifts on construction activity, especially as people move from states like California and New York to Texas and Florida, which could boost construction in those regions. Despite future slowing growth, FMI noted that the upcoming five years will still mark some of the highest levels of construction spending since 1965.
The report discusses how political backing for renewable energy, electric transportation, and power systems will persist, with grid planners projecting a 5% annual growth rate through 2028. Data center power needs are expected to triple by 2030, while the oil and gas sector continues to expand infrastructure.
Infrastructure spending will remain elevated, although growth may slow as Infrastructure Investment and Jobs Act (IIJA) funds taper off after 2026. Bridge investments are leading highway construction projects, and future political discussions may increase funding for infrastructure.
Moreover, the EPA has identified a $630 billion funding gap for wastewater infrastructure, and the U.S. will need $650 billion over 20 years to improve water systems, mainly for repairing distribution networks. Federal funding from the IIJA and programs under the Safe Drinking Water Act will help support these projects. Investments in dams and coastal protection are also growing, focusing on environmental protection and resilience.
With that, we look at the 7 Best Construction Stocks To Buy According to Analysts.
7 Best Construction Stocks To Buy According to Analysts
Our Methodology
For this article, we identified nearly 40 construction stocks through ETFs and stock screeners with a market cap of over $5 billion. We narrowed our list to 7 stocks with the highest average analyst price target, as of September 25. Finally, we also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Construction Stocks To Buy According to Analysts
7. Vulcan Materials Company (NYSE:VMC)
Average Analyst Price Target Upside: 12.16%
Number of Hedge Fund Holders: 40
Vulcan Materials Company (NYSE:VMC) is a US-based producer of construction aggregates and specializes in crushed stone, sand, and gravel. The company also has a significant role in the production of construction materials made from these aggregates, including asphalt and ready-mixed concrete. It is one of the best construction stocks to buy according to analysts.
According to the company’s 2023 10-K report, it has nearly 400 aggregate facilities, 66 asphalt facilities, 63 concrete facilities, and 1 calcium facility. The facilities are strategically positioned to serve significant growth centers across the US and ensure efficient distribution and supply of essential construction materials.
Its products are important for various construction needs, with more than half of its aggregates being used in infrastructure projects like roads and public works, while the rest supports commercial and residential construction.
Among 25 analysts, Vulcan’s (NYSE:VMC) average price target is $280, representing 12.16% upside from current levels on September 25. While several analysts reduced their price targets on the company after its Q2 earnings, most of them are optimistic about the company’s long-term growth.
On August 7, The Fly reported that Truist reduced its price target on the company from $320 to $300, but has maintained its Buy rating on the stock despite the company’s Q2 earnings falling short of expectations. According to the analyst, poor weather conditions negatively affected its volume, and the company’s revised guidance was the main factor behind the drop in stock price. However, the firm expects that in 2025, easier comparisons in terms of volume should lead to growth, which could potentially improve its performance next year.
On August 8, Citi analyst Anthony Pettinari decreased Vulcan Materials’ (NYSE:VMC) price target from $297 to $292 while continuing to maintain a Buy rating. Despite the company missing its Q2 earnings and reducing its fiscal year EBITDA outlook, Pettinari highlighted that its ability to maintain strong pricing remains unaffected. The pricing strength is a positive factor that investors should consider.
Baron Real Estate Fund stated the following regarding Vulcan Materials Company (NYSE:VMC) in its first quarter 2024 investor letter:
“We added to our position in Vulcan Materials Company (NYSE:VMC) during the most recent quarter. Vulcan is a real estate-related company that is the largest construction aggregates producer in the U.S. Vulcan generates approximately 90% of its gross profit from mining, processing, and transporting crushed stone, sand, and gravel (collectively, “aggregates”) from its quarries. The balance of its gross profit is derived from strategically located ready-mix concrete and asphalt. The company’s products are sold and utilized in infrastructure projects such as highways, as well as residential and non-residential construction. Vulcan has local leadership positions across its footprint.
We believe aggregates are an attractive business for two main reasons: • High barriers to entry limit new competition: Permits to open new quarries are difficult to obtain, and the approval process typically takes 5 to 10 years • Consistent pricing power through cycles: Aggregates producers have historically enjoyed great pricing power owing to the difficulty in opening competing new quarries, the limited substitutes for quality aggregates, and a high weight-to-price ratio that makes transportation expensive relative to the cost of the material. In the last 30 years, pricing of aggregates has increased, on average, 4% per year…” (Click here to read the full text)
6. Nucor Corporation (NYSE:NUE)
Average Analyst Price Target Upside: 16.13%
Number of Hedge Fund Holders: 40
Nucor Corporation (NYSE:NUE) is one of the most prominent players in the American steel industry and is the leading recycler of scrap metal across North America. The company has a diverse product portfolio that includes rebar, structural steel, carbon steel plates, and specialty steel for various industries, including automotive and construction.
Since its inception, the company has significantly expanded through strategic acquisitions and mergers. In June, the company announced the acquisition of Rytec Corporation, a leading manufacturer of high-speed commercial doors, in an all-cash deal valued at $565 million. This price reflects approximately 12.5 times Rytec’s projected EBITDA for 2024. Rytec specializes in high-speed spiral rolling doors for several applications, including warehouses and cold storage.
Leon Topalian, Nucor’s (NYSE:NUE) chair, president, and CEO, said that this acquisition aligns with the company’s strategy to diversify beyond core steel operations and expand into complementary downstream markets. He emphasized the potential for cross-selling with the company’s other businesses and the improvement of its product offerings in the commercial sector.
In April, the company announced the acquisition of Southwest Data Products, Inc. (SWDP) for $115 million. SWDP specializes in manufacturing and installing data center infrastructure. This is another one of the company’s acquisitions that supports its strategy to diversify beyond steel production.
In Q2, 40 hedge funds had stakes worth $520.506 million in Nucor (NYSE:NUE). Balyasny Asset Management owns 421,458 shares of the company, worth $66.62 million, and is the largest shareholder of the company, as of June 30.
It is one of the best construction stocks to buy according to analysts as 15 analysts have covered it with an average price target of $174, which shows an upside of 16.13%. On September 13, Seaport Global analyst Martin Englert reiterated a Buy rating for the company stock with a $170 price target.
5. Fluor Corporation (NYSE:FLR)
Average Analyst Price Target Upside: 17.5%
Number of Hedge Fund Holders: 30
Fluor Corporation (NYSE:FLR) is a Texas-based engineering and construction firm founded in 1912. It started its business by building oil refineries and pipelines in California before expanding its operations globally. The company offers its products, services, and solutions to several industries including energy, chemicals, manufacturing, infrastructure, mining, metals, advanced technologies, and life sciences.
Its engineering, procurement, and construction (EPC) services span the entire project lifecycle, from conceptual design to operations and maintenance. In the energy sector, its expertise includes consulting, design-build, and operations for oil and gas production, processing, renewable fuels, and renewable energy projects.
Fluor (NYSE:FLR) has over 50 years of experience providing engineering, procurement, and construction management (EPCM) solutions across many manufacturing sectors, including food and beverage, advanced materials, sustainable products, robotics, and synthetic graphite.
It excels in managing complex projects from concept to commissioning, emphasizing cost efficiency and technological advancements. The company offers specialized services in advanced materials, smart battery production, and fast-moving consumer goods.
On August 30, TipRanks reported that Analyst Andrew Wittmann from Robert W. Baird maintained a Buy rating on Fluor (NYSE:FLR) with a price target of $54.00. The analyst mentioned its expected earnings growth in the latter half of the year, which is expected to continue into 2025. The company’s comprehensive EPC capabilities are in high demand, which points to a favorable market for its services.
Wittmann also pointed to the positive developments in the company’s ongoing projects and the steady earnings increase from new, higher-margin contracts, including notable projects like Pantex and Lily. While some projects may see reduced contributions, the company is set for additional awards in the latter half of 2024, especially in high-margin ventures such as the Romanian pre-FEED project.
The analyst noted that the forthcoming strategic plan may include shareholder returns, such as share buybacks, supporting his positive outlook on the company’s growth and stability.
Fluor’s (NYSE:FLR) average analyst price target among 11 analysts is $54, representing an upside of 17.5% from current levels, as of September 25. This ranks the company at 5 on our list of best construction stocks to buy according to analysts.
4. Martin Marietta Materials, Inc. (NYSE:MLM)
Average Analyst Price Target Upside: 17.57%
Number of Hedge Fund Holders: 45
Martin Marietta Materials, Inc. (NYSE:MLM) is an American company that specializes in the production and distribution of building materials, including aggregates, cement, ready-mixed concrete, and asphalt. The company’s operations run across 28 US states, Canada, the Bahamas, and the Caribbean Islands.
Its product portfolio includes a wide variety of aggregates, such as crushed stone, sand, and gravel, as well as cement, concrete, and magnesia specialties. Its Magnesia Specialties business produces high-purity magnesia and dolomitic lime products used worldwide in environmental, industrial, agricultural, and specialty applications.
Martin Marietta (NYSE: MLM) has been pursuing strategic acquisitions and partnerships to advance its operations and market presence. In 2024, the company strengthened its footprint in the Southeastern U.S. with the acquisitions of Blue Water Industries and Albert Frei & Sons, which enable it to tap into promising new markets in regions such as Tennessee and South Florida.
The integration of these operations has exceeded management’s expectations, with a $7 million contribution to adjusted EBITDA in the second quarter. The company also has a healthy balance sheet with a net debt-to-EBITDA ratio of 2 times, which provides flexibility for future acquisitions and investments.
Martin Marietta (NYSE:MLM) is the 4th best construction stock to buy according to analysts. It has been covered by 23 analysts and 16 of them have a Buy-equivalent rating on it.
One of the latest Buy recommendations for the company was given by Jefferies analyst Philip Ng, as reported by TipRanks on September 6. The analyst has a price target of $650 on Martin Marietta (NYSE:MLM).
Baron Real Estate Fund stated the following regarding Martin Marietta Materials, Inc. (NYSE:MLM) in its Q2 2024 investor letter:
“In the second quarter, we acquired shares in Martin Marietta Materials, Inc. (NYSE:MLM), a leading producer of aggregates (77% of gross profit) and specialty products. The company’s products are sold and utilized in infrastructure projects such as highways, as well as residential and non-residential construction. Martin Marietta has local leadership positions across its footprint.
We believe aggregates are an attractive business for two main reasons: High barriers to entry limit new competition: Permits to open new quarries are difficult to obtain, and the approval process typically takes 5 to 10 years. Martin Marietta has more than 75 years of aggregates reserves at its current extraction rates. Consistent pricing power through cycles: Aggregates producers have historically enjoyed great pricing power owing to the difficulty in opening competing new quarries, the limited substitutes for quality aggregates, and a high weight-to-price ratio that makes transportation expensive relative to the cost of the material. In the last 30 years, pricing of aggregates has increased, on average, 4% per year…” (Click here to read the full text)
3. Summit Materials, Inc. (NYSE:SUM)
Average Analyst Price Target Upside: 21.12%
Number of Hedge Fund Holders: 24
Summit Materials, Inc. (NYSE:SUM) is a prominent player in the construction materials industry that specializes in aggregates, cement, ready-mix concrete, and asphalt. The company operates with a vertically integrated model, which allows it to serve a diverse range of markets across the United States and British Columbia, Canada.
It has established itself as a market leader by focusing on high-quality products and services tailored to public infrastructure, residential developments, and non-residential projects such as commercial properties and warehouses.
The company has been on a growth trajectory since its inception, as it has acquired over 80 companies in the construction materials sector. This strategy has enabled it to improve its operational scale and geographical reach. It has around 750 locations in the US and one Canadian province.
In the second quarter, Summit Materials (NYSE:SUM) stock was held by 24 hedge funds, at a combined value of $271.332 million. With 2.75 million shares worth $100.817 million, Millennium Management is the most prominent shareholder of the company, as of June 30.
17 analysts have covered the company and 13 of them maintain a Buy-equivalent rating on the stock. On August 26, The Fly reported that Morgan Stanley analyst Angel Castillo initiated the coverage of Summit Materials (NYSE:SUM) with an Overweight rating and a price target of $51. It takes its place among our best construction stocks to buy according to analysts.
The analyst highlighted several positive factors for investors and noted that the current supply and demand dynamics for cement in the U.S. are “tight” which could benefit the company.
Castillo pointed out the advantages of the company’s vertically integrated structure, which allows for more efficient operations and potentially higher margins.
He also mentioned that the company is well-positioned to capitalize on opportunities in the residential market, which is currently at a low point, as well as the potential for growth through acquisitions.
2. Lennar Corporation (NYSE:LEN-B)
Average Analyst Price Target Upside: 21.69%
Number of Hedge Fund Holders: 60
Lennar Corporation (NYSE:LEN-B) is one of the largest homebuilders in the United States and is headquartered in Florida. It has a diverse portfolio that includes investments in both multifamily and single-family residential rental properties, luxury developments, property technology through its LenX division, and mortgage services.
The company’s innovative approach to homebuilding is demonstrated by its “Everything’s Included” program, which integrates desirable features into homes at no additional cost. The initiative aims to improve customer satisfaction by providing modern amenities such as smart home technology and energy-efficient appliances right from the start.
Lennar (NYSE:LEN-B) reported solid results for the third quarter on September 19 as it achieved net earnings of $1.2 billion, or $4.26 per diluted share, which represented a 10% increase year-over-year and outperformed the analyst expectations by $0.63 per share. Moreover, the company’s revenue of $9.4 billion was up almost 8% year-over-year and exceeded the forecasts by $240 million.
Some major highlights include a 5% increase in new orders, totaling 20,587 homes, and a backlog of 16,944 homes valued at $7.7 billion. Deliveries rose by 16% to 21,516 homes, contributing to total revenues of $9.4 billion. Homebuilding operating earnings stood at $1.5 billion, with a gross margin of 22.5%. The company ended the quarter with $4.0 billion in cash and cash equivalents for homebuilding and no outstanding borrowings on its $2.2 billion revolving credit facility.
The company’s executive chairman, Stuart Miller highlighted the favorable economic conditions for homebuilders and mentioned the strong demand driven by solid employment and a chronic housing supply shortage. The company expects to deliver between 22,500 and 23,000 homes in the fourth quarter. It also remains committed to strengthening its balance sheet and pursuing its land-light strategy, with total liquidity exceeding $6.2 billion.
1. CEMEX, S.A.B. de C.V. (NYSE:CX)
Average Analyst Price Target Upside: 45.10%
Number of Hedge Fund Holders: 22
CEMEX, S.A.B. de C.V. (NYSE:CX) is a Mexican multinational building materials company based in San Pedro, Nuevo León. It is recognized as one of the largest cement producers globally. It operates in over 50 countries with a diverse product range including cement, ready-mix concrete, and aggregates. It tops our list of the best construction stocks to buy according to analysts.
The company’s solutions are designed to meet the evolving needs of its customers, from sustainable building materials to advanced construction technologies. The company was founded in 1906 and over the years it has expanded through strategic partnerships and acquisitions.
On September 3, CEMEX (NYSE:CX) announced its acquisition of a majority stake in RC-Baustoffe Berlin GmbH & Co. KG, a recycling firm within the Heim Group. The acquisition will complement its Regenera division, which focuses on providing circular solutions to prolong the life cycle of construction materials through their reuse in value-added products.
The recycling facility can process up to 400,000 tons of material annually, transforming it into repurposed aggregates for concrete production and reintegrating them into the construction sector.
Analysts have quite bullish sentiments on CEMEX (NYSE:CX) as it has been covered by 18 analysts and a majority of them maintain a Buy-equivalent rating on the company stock. Their average price target of $9.25 represents an upside of 45.10% to the company’s stock at current levels on September 25.
On August 21, The Fly reported that JP Morgan resumed coverage of the company with an Overweight rating and a price target of $8. Despite a generally bearish outlook on the U.S. construction materials sector, the analyst finds the company’s stock valuation to be “extremely attractive.” The firm views its recent divestments as a positive move, which would increase its exposure to less favorable emerging markets and strengthen its balance sheet.
On September 9, CEMEX (NYSE:CX) received a Buy rating from Barclays analyst Benjamin Theurer with a $9 price target.
While we acknowledge the potential of CEMEX, S.A.B. de C.V. (NYSE:CX) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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