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 United States Lime & Minerals, Inc. (NASDAQ:USLM) 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).
An open-pit quarry with heavy machinery and workers at a lime and limestone production facility.
United States Lime & Minerals, Inc. (NASDAQ:USLM)
Number of Hedge Fund Holders: 23
United States Lime & Minerals, Inc. (NASDAQ:USLM) plays a key role in the construction industry as it produces lime and limestone products that are used in various construction processes. Its revenues in Q4 2024 on the YoY basis were aided by higher average selling prices for its lime and limestone products and elevated sales volumes, mainly to its construction, environmental, and industrial customers. United States Lime & Minerals, Inc. (NASDAQ:USLM)’s revenues in Q4 2024 came in at $80.1 million as compared to $65.7 million in Q4 2023, an increase of 21.9%. Lime and limestone revenues were $79.8 million in Q4 2024 as compared to $65.4 million in Q4 2023, reflecting 22.0% growth.
In FY 2024, United States Lime & Minerals, Inc. (NASDAQ:USLM) saw higher revenues due to an increase in average selling prices for its lime and limestone products, partially offset by a decline in sales volumes resulting mainly from lower demand from its construction customers, offset in part by higher demand from its industrial, environmental, and roof shingle customers. Overall, the growth in the construction sector is expected to fuel demand for United States Lime & Minerals, Inc. (NASDAQ:USLM)’s products as lime is critical in the production of cement, concrete manufacturing, and soil stabilization of infrastructure projects.
Diamond Hill Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“On an individual holdings’ basis, among our top Q4 contributors were Allegiant Travel and United States Lime & Minerals, Inc. (NASDAQ:USLM). United States Lime & Minerals (USLM) manufactures and supplies lime and limestone products to various construction and industrial customers. During Q4, USLM benefited from a particularly beneficial confluence of factors: Higher average selling prices for lime and limestone products as well as increased sales volumes to construction and roof shingle customers have helped drive robust revenue growth. Further, USLM effectively managed its relatively fixed cost base, allowing increased prices to flow directly to higher margins and resulting in record margins in Q4. The company also benefited from lower natural gas prices and favorable direct labor, raw materials, energy, transportation and plant operating cost conditions — all of which supported profitability. Finally, USLM’s strategic position in Texas’s growing I-35 corridor as well as strong pricing power in key markets and effective variable cost management contributed to margin expansion in Q4.”
Overall USLM ranks 7th on our list of the best construction stocks to buy. While we acknowledge the potential of USLM 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 USLM 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.