We recently compiled a list of the 10 Best Construction Stocks to Buy Now. In this article, we are going to take a look at where CRH plc (NYSE:CRH) stands against the other construction stocks.
As per Cumming Group, which provides project and cost-management services, the construction industry kicked off 2025 with a healthy momentum, thanks to the robust fundamentals from 2024. The firm also mentioned that the Dodge Momentum Index (DMI), which helps measure non-residential building spending, demonstrated steady growth as it wrapped up 2024 with a healthy 10% increase, implying confidence in owners and developers. Overall, the commercial real estate sector continues to witness a significant evolution, mainly in office spaces, where work-from-home and hybrid work arrangements transformed occupancy trends.
Outlook for the Construction Sector
Amidst increased interest rates, uncertainty related to various tariffs, and price inflation impacting residential and commercial segments, Cumming Group opines that positive indicators are also emerging. The construction investment, mainly fueled by government spending, has been providing much-needed stability to the broader sector. Moving forward, the sector’s ongoing resilience and adaptability place it well for the year 2025, despite uncertainty regarding tariffs. Apart from this uncertainty, healthy employment numbers, and consistent government investment, together with potential interest rate relief, create a strong foundation for sustained growth.
As per PHCPPros, which covers aspects of the plumbing, heating, cooling, and piping industry, ConstructConnect’s 2025 forecast for a total construction spending increase of 8.5% is broad-based, with residential and non-residential building construction projected to expand by 12% and 8%, respectively.
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Key Drivers Likely to Boost the Construction Sector
PHCPPros opines that the declining interest rates due to the US Fed’s focus on reducing Fed Funds Rate, an instrument indirectly influencing the private sector borrowing rates, is likely to be the primary driver of the growth. The reduced rates are expected to help reinvigorate non-residential construction activity and residential housing market activity. Notably, lower rates and the ensuing improvement in housing affordability can ease the gridlock in sales due to the combination of increased home prices and elevated interest rates.
Furthermore, the electrification of the economy is expected to fuel strong demand for power generation and power infrastructure projects. The growth of AI, higher EV adoption, and the increased dependency on electric appliances and devices are expected to stimulate the need for electric generation and infrastructure construction moving forward. These measures are expected to fuel the demand for megaprojects.
Our Methodology
To list the 10 Best Construction Stocks to Buy Now, we used a screener to shortlist companies catering to the broader construction sector. Next, we filtered out the ones that were popular among hedge funds. Finally, the stocks were arranged in ascending order of their hedge fund sentiments, as of Q4 2024.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A construction worker wearing a hard hat and safety glasses at a site, carrying concrete blocks.
CRH plc (NYSE:CRH)
Number of Hedge Fund Holders: 90
CRH plc (NYSE:CRH) provides building materials solutions in Ireland and internationally. The company remains a critical player in the broader construction industry as it makes building materials such as cement, concrete, and aggregates which are utilized in construction projects. CRH plc (NYSE:CRH) demonstrated robust pricing discipline, mainly in the Americas segment, which places it well for future margin expansion. With the company continuing to strengthen its market position in North America, it might gain increased pricing power, enabling it to pass on cost increases to customers more effectively. The company has announced the acquisition of Dutra Materials.
Dutra Materials complements CRH plc (NYSE:CRH)’s Americas Materials Solutions business in the Western US, bringing additional strategic aggregate reserves and asphalt production capabilities to help northern California construction market. Furthermore, CRH plc (NYSE:CRH)’s emphasis on the potential for margin expansion is aided by its focus on high-value products and its strategic positioning in markets having favorable supply-demand dynamics. With the expectations of higher infrastructure spending in the US, the company remains well-placed to benefit from large-scale projects offering better margins.
L1 Capital, an investment management firm, released its Q3 2024 investor letter. Here is what the fund said:
“CRH plc (NYSE:CRH) (Long +24%) shares rallied over the quarter, supported by a constructive Q2 earnings result and an increase to FY24 EBITDA and EPS guidance. The June quarter was affected by adverse U.S. weather conditions and heavy rains which negatively impacted volumes. CRH was able to offset these impacts and continue to deliver double-digit earnings growth, (unlike several U.S. listed peers who were forced to cut guidance). We believe this illustrates the quality of the company’s vertically integrated business model and the strength of its management team in navigating more challenging market conditions. CRH remains exposed to the ‘golden age’ of infrastructure spending in the U.S., which will underpin many years of robust demand. The Infrastructure Investment and Jobs Act (‘IIJA’), the Inflation Reduction Act (‘IRA’) and the Chips and Science Act will together add roughly US$2 trillion of investment to ageing U.S. infrastructure.”
Overall CRH ranks 1st on our list of the best construction stocks to buy. While we acknowledge the potential of CRH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than CRH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.