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 Martin Marietta Materials, Inc. (NYSE:MLM) 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 large construction project with cranes and forklifts in action, demonstrating the company’s building materials business.
Martin Marietta Materials, Inc. (NYSE:MLM)
Number of Hedge Fund Holders: 54
Martin Marietta Materials, Inc. (NYSE:MLM) is a natural resource-based building materials company, that is engaged in supplying aggregates and heavy-side building materials to the construction industry. Analyst Angel Castillo from Morgan Stanley maintained a “Buy” rating on the company’s stock, keeping the price target at $622.00. The analyst’s rating was backed by a combination of factors such as Martin Marietta Materials, Inc. (NYSE:MLM)’s encouraging 2025 guidance and its better-than-anticipated performance in key areas.
As per the analyst, the company’s overall 2025 outlook matched or exceeded expectations, mainly in terms of aggregates volume and pricing growth. Martin Marietta Materials, Inc. (NYSE:MLM)’s outlook for aggregates volume growth of 2.5% – 5.5% YoY remains slightly more optimistic than previous projections and the broader market consensus. Notably, potential policy changes can result in significant benefits to the company’s business. The renewed focus on infrastructure development can result in higher demand for construction materials.
Large-scale projects including road construction, bridge repairs, and public works can benefit Martin Marietta Materials, Inc. (NYSE:MLM) as a critical supplier of aggregates and cement. Also, policies focused on reducing regulatory burdens in the overall construction and mining industries can lower the compliance costs for the company, helping profit margins.
Overall MLM ranks 3rd on our list of the best construction stocks to buy. While we acknowledge the potential of MLM 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 MLM 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.
