Engineering & Infrastructure
During 2022, Engineering and Infrastructure equities outperformed broad equity markets. Companies whose business model reflect public funding, reshoring, energy transition and infrastructure exposure continued to gain investor support; 2023 will likely build upon those vectors, with potential aid from a more cautious Federal Reserve and economic recovery potential into 2024 post US recession expectations. Valuation should continue to reflect positive E&I business transformations support added business visibility and growth in revenues, margins and cash generation. Most financial profiles appear well-positioned to drive accretive capital allocation to support business fundamentals, select acquisition flow and equity valuation through share repurchases and annual dividend increases. We expect E&I equities will continue benefit from a business mix that should continue to gain support from more visible and tangible new business and backlog flow from the various fiscal stimulus packages and legislation enacted by US and International governments, especially through highway, global defense, energy transition and continued ESG initiatives. Programs like Inflation Reduction Act, CHIPS Act and the recently signed $1.7 billion omnibus should add tailwinds for private sector investment, manufacturing, energy, power industrial and renewable clients. We anticipate 2023 will provide continued upside potential as several E&I names appear attractive with fundamentals emphasizing funding visibility, healthy backlogs, secular end market expansion, operational execution and financial profiles structured to return capital to shareholders.
- Vulcan Materials Company (VMC)
Michael S. Dudas