Five infrastructure stocks to buy as governments fund public projects provide investors with a chance to profit from the use of tax dollars.
The five infrastructure stocks to buy can serve as “good inflation hedges” and a steadier source of growth then other types of stocks, Bob Carlson, a pension fund chairman who also heads the Retirement Watch investment newsletter. Infrastructure businesses tend to have fairly steady, reliable revenue, Carlson added.
In addition, many infrastructure stocks have revenue streams that automatically are adjusted for inflation, Carlson continued. Infrastructure stocks also tend to benefit from obtaining a significant amount of their revenue from governments that have consistent sources of funding, as compared to recession-vulnerable companies.
Bob Carlson, head of Retirement Watch, meets with Paul Dykewicz
Fund Offers Alternative to Five Infrastructure Stocks to Buy
Among open-end mutual funds, Carlson said he likes Cohen & Steers Global Infrastructure (CSUAX). The fund has multiple share classes with different loads — a sales charge or commission — and fees. Many investment brokerages offer the A shares with the ticker CSUAX without any load.
“The fund doesn’t try to track an index,” Carlson said. “The managers can invest in any infrastructure company around the world. They can adjust their sector allocations and stock holdings based on their analysis of the economy and companies. Cohen & Steers first develops an economic outlook and then determines which infrastructure sectors are most likely to benefit from that outlook. Then, it analyzes each company in the sectors before deciding which to buy for the fund.”
The mutual fund tends to be focused on the managers’ favorite sectors and stocks. It recently held 54 stocks with 36% of the fund in the 10 largest positions.
Chart courtesy of www.stockcharts.com
Top holdings recently were NextEra Energy (NYSE: NEE), CSX (NASDAQ: CSX), Sempra Energy (NYSE: SRE), Grupo Aeroportuario (NYSE: PAC) and Transurban Group (OTCM: TRAUF). The mutual fund’s largest sector holdings consisted of electric utilities, 37%; midstream energy, 10%; freight rails, 10%; gas distribution, 9%; and airports, 8%.
The fund’s recent yield reached 2.91%. It lost 5.21% in 2022 but is up 2.77% so far in 2023 and 1.97% over the last three months.
Brookfield Infrastructure Corporation Leads Five Infrastructure Stocks to Buy
Brookfield Infrastructure Corporation (NYSE: BIPC), of Toronto, is up 9.61% since the stock was recommended by the Forecasts & Strategies investment newsletter on November 8, 2021. Mark Skousen, PhD, heads the Forecasts & Strategies investment newsletter and also teaches at Chapman University, where he is currently a Presidential Fellow and a past winner of the school’s “My Favorite Professor” award.
Professor Mark Skousen leads Forecasts & Strategies.
Brookfield Infrastructure is one of the largest owners and operators of critical global infrastructure networks that facilitate the movement and storage of energy, water, freight, passengers and data. The company is intended to be a pure play, publicly traded, global infrastructure company. It aims to invest in “premier infrastructure assets” with stable cash flows, high margins and strong growth prospects, the company’s management said.
Its experienced management team has a proven track record and a has identified a key goal of providing returns to unitholders. With an attractive distribution yield and a distribution growth target of 5-9% annually, Brookfield Infrastructure seeks to provide strong, risk-adjusted total returns to its investors.
Chart courtesy of www.stockcharts.com
Motorola Solutions Earns Berth Among Five Infrastructure Stocks to Buy
Motorola Solutions, Inc. (NYSE: MSI), a Chicago-based provider of mission-critical communications products and solutions & services for communities & businesses, received an outperform rating from the William Blair & Co. investment firm that also is based in the Windy City. Despite beating analysts’ consensus first-quarter results and management boosting its guidance, Motorola’s stock has not lifted off.
“Although numbers and trends were strong, we believe that investors are starting to price in decelerating growth in the second half of the year on difficult comps associated with last year’s price increases,” according to a May 5 research note by William Blair equity research analyst Louis DiPalma. “In addition, the 2023 guidance does not reflect any potential impact from the U.K. price cap. We lowered our 2014 revenue estimate by the full potential impact, although we believe that the ultimate cap may be reduced.”
Motorola’s first-quarter financial results reflected positive local and state budget trends for the largest global provider of public safety technology, according to William Blair. Even though public companies typically do not raise their full-year guidance after the first quarter, Motorola’s management did so, DiPalma noted.
The company reported first-quarter revenue of $2.17 billion, compared with a consensus estimate of $2.13 billion. Motorola’s adjusted earnings per share (EPS) jumped to $2.22 above consensus estimates of $2.06.
Chart courtesy of www.stockcharts.com
Five Infrastructure Stocks to Buy Feature Verra Mobility
Verra Mobility Corporation (NASDAQ: VRRM), of Mesa, Arizona, processes millions of transactions each year through connectivity with more than 50 individual tolling authorities and 400-plus issuing organizations. The stock is another “outperform” recommendation of William Blair.
Indeed, Willliam Blair described Verra Mobility as a “smart transportation provider” that reported first-quarter results that topped analysts’ consensus estimates. The investment firm’s full-year outlook for the stock reaffirmed its conservative assumption that travel demand will cool in the second half of the year.
Chart courtesy of www.stockcharts.com
Results Warrant Spot Among Five Infrastructure Stocks to Buy
As far as Verra Mobility’s first-quarter 2023 results, its total revenue reached $191.9 million, an increase of 13% compared to $170.4 million for the first quarter of 2022. Service revenue growth rose 15% due to increases in travel volume and related tolling activity in the Commercial Services segment. That business unit grew 17%, aided by a gain in service revenue from Verra Mobility’s Government Solutions segment, which increased revenue 14%, driven by the expansion of speed programs. Parking Solutions service revenue jumped 10% due to increases in the company’s software as a service (SaaS) product offerings and various services related to parking management solutions.
Net income for Verra Mobility’s first quarter of 2023 reached $4.6 million, or $0.03 per share, based on 153.1 million diluted weighted average shares outstanding. For the comparable period of 2022, net income topped out at $10.0 million, or $0.06 per share, based on 160.7 million diluted weighted average shares outstanding. Adjusted EPS for the first quarter of 2023 was $0.26 per share, compared to $0.22 per share for the first quarter of 2022, the company reported.
Verra Mobility’s key business segments consist of:
- Commercial Services, offering automated toll and violations management, as well as title and registration solutions to rental car companies, fleet management companies and other large fleet owners.
- Government Solutions, delivering automated safety solutions to municipalities, school districts and government agencies, including services and technology that enable photo enforcement related to speed, red-light, school bus and city bus lane management.
- Parking Solutions, providing an integrated suite of software and hardware solutions to universities, municipalities, parking operators, health care facilities and transportation hubs in the United States and Canada.
Connell Chooses Her Favorite Among Five Infrastructure Stocks to Buy
Michelle Connell, president and owner of Dallas-based Portia Capital Management, said she really likes the thesis behind Verra Mobility because the world has embraced travelling and seeking new adventures since COVID crisis has diminished from its peak. As a result, Verra Mobility will profit, Connell continued.
Michelle Connell heads Portia Capital Management.
Highlights of Verra Mobility cited by Connell included that 53% of the company’s revenues are regarded as governmental and 43% are commercial. Transponders further are put in the cars owned by corporations such as Avis, Hertz and Enterprise to track tolls to be paid and violations made by the drivers.
Another plus is that Verra Mobility covers 95% of the toll roads in the United States, as well as in many international countries. The business produces lofty margins of about 65% earnings before interest, taxes, depreciation and amortization (EBITDA), Connell told me.
The company also benefits from a growing international trend for cashless tolls of roads, with 90% of its revenues considered reoccurring, Connell continued. She also added that the company is in the process of paying down its debt, as well as buying back $100 million of its equity.
Connell estimated that Verra Mobility’s stock still has upside of 15-20% over the next 12 to 18 months. Since the stock is currently sitting near its all-time high, Connell advised that prospective buyers of the stock stay patient to avoid overpaying during short-term rallies.
SPX Technologies Rates Among Five Infrastructure Stocks to Buy
SPX Technologies (NYSE: SPXC), a Charlotte, North Carolina-based supplier of highly engineered products and technologies, holds competitive positions in the HVAC and detection and measurement markets, ranking as another “outperform” recommendation of William Blair. The investment firm wrote in its May 5 research note that it expects SPX Technologies to trade upward after beating first-quarter results and raising estimates.
The company’s adjusted EPS of $0.93 per share exceeded William Blair’s estimate of $0.59 per share and the Street’s forecast of $0.60 per share. Revenues in the first quarter of $400 million blew past William Blair’s projection of $335 million and consensus estimates of 331 million.
“SPX vastly exceeded investors’ expectations entering 2023, alleviating any concerns of a slowing macro environment at its core HVAC business,” William Blair equity analyst Lawrence De Maria wrote in a May 5 research note. “During the quarter, organic revenue growth rose a record 31% at HVAC, led by 36% growth at cooling followed by 22% at heating.”
Chart courtesy of www.stockcharts.com
AZEK Ascends Among Five Infrastructure Stocks to Buy
The AZEK Company Inc. (NYSE: AZEK) is a Chicago-based manufacturer of low maintenance and environmentally sustainable outdoor living products that are built with roughly 90% recycled material. The company’s products primarily replace wood on the outside of homes to offer a long-lasting and eco-friendly solution to consumers.
William Blair’s May 5 research note rated AZEK as “outperform” but also forecast that the company’s share price would trade down since it had soared almost 30% so far this year. AZEK’s recently released second-quarter EBITDA beat William Blair’s model by 18% on revenue and margins.
“While shares have rallied year-to-date, we believe residential decking, railing and exteriors demand holding up better than expected supports our long-term view that wood conversion and outdoor living will drive superior growth,” William Blair wrote in its research note. “Shares are trading at 13 times our 2024 adjusted EBITDA estimate, which is a 32% discount to TREX. We believe a 15-20% discount is more appropriate as Azek is proving its strategy to take share and increase margins with recycling and operational excellence is working.”
Chart courtesy of www.stockcharts.com
Infrastructure Spending Is Increasingly Popular
Maryland’s new Gov. Wes Moore signed into law an infrastructure spending bill on Monday, May 8, aimed at creating a pilot program in the state’s Department of Commerce. The program’s funds would cover certain costs for infrastructure projects in eligible technology sectors.
This legislation is the latest example of state and national governments around the world seeking to target development of key industries. This program will report to the governor and the state’s legislature, known as the General Assembly, about the projects it funded and their economic impact by July 1, 2026.
CDC Reports Rising Vaccinations Against New Bivalent Variant of COVID-19
The U.S. Centers for Disease Control and Prevention (CDC) reported at least one vaccination against COVID-19 and its bivalent variant has been given to 270,129,677 people, or 81.4%, of the U.S. population, as of May 3. Those who have completed the primary COVID-19 doses totaled 230,582,699 of the U.S. population, or 69.5%, according to the agency.
Also as of May 3, the United States had given a bivalent COVID-19 booster to 52,634,100 people who are age 18 and up, equaling 20.4% of America’s population. Medical studies have shown vaccinations help keep people healthy and reduce the morbidity from contracting COVID, potentially boosting confidence of consumers to shop at stores, travel and otherwise spend money.
The five infrastructure stocks to buy seem ready to climb, despite economic uncertainty. Governments remain funded and able to commit their financial resources to public projects.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal omf Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.
