Engineering & Infrastructure

Investors continued to better support E&I companies whose business model and end-market positioning reflected exposure to the extraordinary fiscal stimulus witnessed in the US and several Western markets. Continued acceleration of reshoring and near-shoring, new energy transition and heavy non-residential construction should provide fundamental support from private sector clients. We expect 2024 will likely offer continued backlog, revenue and earnings growth while a possibly more supportive Federal Reserve as inflation readings recede and near-term macroeconomic activity suggests less restrictive monetary policy. Generally, multi-year secular trends should support improved relative valuation as E&I firms drive higher cash generation. Financial profiles have continued to improve and appear well-positioned to drive accretive capital allocation to support business fundamentals, select acquisition flow, share repurchases, and annual double-digit dividend increases. E&I equities will benefit from a business mix that should continue to gain support from more visible and tangible new business and backlog flow from the various international fiscal infrastructure and capital investment stimulus, especially through transportation, renewable energy and electric grid, global defense spending, advanced facilities, healthcare, traditional energy and commodity markets. While macro environment focused upon rate directions, geopolitical conflict and recession predictions that have yet to been secured, healthy state, municipal budget flows, energy transition narratives, anticipation regarding US Federal stimulus emerging to support projects. The continued fiscal funding support for increased US clean energy (IRA), infrastructure (IIJA, manufacturing (CHIPS)) spending will continue to drive increased public sector demand across the service chain – design and engineering firms should generate added project opportunities as governments sort out optimal project support while construction material and heavy civil construction suppliers will likely witness accelerated bidding opportunities supported by IIJA during the next several years.