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Best global infrastructure companies having strong growth opportunities

best global infrastructure companies

When we hear the word infrastructure, our minds are filled with images related to roads, bridges, water supply systems, transportation networks, etc. However, over past couple years, for several people throughout the world, this definition of infrastructure has changed a lot. In a developed economy such as the US, where majority of the people have access to the internet facilities, and where hi-tech services make significant contribution to local economies, is the responsibility of best global infrastructure companies to develop the basic infrastructure so that these basic services are accessible to all. 

Tech-related infrastructure has been categorised as one of the critical areas where the US has been lagging behind when compared to the rest of the world. For instance, China continues to aggressively invest in 5G towers to enhance coverage, and the country is also investing significantly in the manufacturing of latest chip technology. China has its focus on scaling up smartphone production in a bid to build presence in foreign markets. When the Biden presidency started, there was a proposal of $2 trillion infrastructure plan which was later approved, as reported by NY times. As per this plan, the US government decided to earmark $650 billion for infrastructure facilities, ~$620 billion for transportation infrastructure, $580 billion for R&D, and $400 billion was decided to be used for caretaking economy. When this proposal was announced, best global infrastructure companies saw strong interests from the global investors. 

Therefore, there are expectations that hiring for such jobs should start as early as next year and should accelerate through 2025 and 2026, according to the Association of Builders and Contractors, which is a trade group for commercial and industrial construction industry.

With this in mind, let us now have a look at best global infrastructure companies having strong growth opportunities.

1. AECOM

The company has been categorised as one of the largest global providers of design, engineering, construction, and management services.

It has released 4Q and FY23 results and its 4Q revenue saw an increase of ~12% to $3.8 billion, operating income fell 56% to $80 million, the operating margin witnessed a fall of 330 basis points to 2.1%, net income declined 71% to $34 million and diluted EPS fell 71% to $0.24. Its full-year adjusted EBITDA and adjusted EPS came in at $964 million and $3.71, respectively. Both these figures exceeded the company’s original and increased guidance mid-points.

Backlog in design business went up by 12% to a record high as a result of strength in the company’s global water, transportation and environment businesses, that are being supported by higher investment in infrastructure, sustainability and resilience.

The company anticipates return on invested capital (ROIC) of ~20% in FY24, exhibiting achievement in FY23 of previously increased 17% target. Full-year operating cash flow of the company came in at $696 million and FCF was $591 million, exhibiting achievement of the company’s cash flow guidance for 9th consecutive year. The company has been operating with strong balance sheet, providing competitive advantage, as ~80% of its debt is fixed, swapped to fixed, or capped over the upcoming numerous years and zero near-term bond maturities.

2. CNH Industrial N.V.

The company has been categorised as equipment and services company, which develops, manufactures and sells specialized machines and services. It serves farming and construction industries, and also supplies replacement parts and accessories.

Its 3Q consolidated revenue and net income both grew 2% year-over-year and agriculture segment adjusted EBIT margin went up by 50 basis points year-over-year to 15.3%, despite net sales falling by 3%. Net sales for Industrial Activities came in at $5.33 billion (a decline of ~1% in comparison to 3Q22). Net cash provided by operating activities came at $232 million and Industrial FCF absorption was $127 million in 3Q. 

Decline in net sales of industrial activities was mainly because of lower industry demand in agriculture, principally in South America and in EMEA for combines. Pricing remained favorable for both Industrial segments, and Construction net sales saw an increase of ~6%. Gross profit margin of Industrial Activities came in at 23.9% (23.0% in 3Q22), exhibiting improvement from corresponding period from previous year in both Agriculture and Construction as a result of strong price realization and improved operating performance.

The company modified 2023 outlook for its industrial activities, with net sales expected to be up by between 3% and 6% year-over-year including currency translation effects. FCF of Industrial Activities is expected to be between $1.0 billion and $1.2 billion. 

3. Fluor Corporation

The company has been categorised as one of the largest global providers of engineering, procurement, construction and fabrication services. 

It announced its results for 3Q ended September 30, 2023, in which, its revenue came in at $4.0 billion and net earnings attributable to Fluor were $206 million, or $1.15 per diluted share. 3Q results exhibit the company’s deliberate focus on improving profitability with the help of improved project execution and high-quality contract backlog.

Its 3Q new awards were consistent with the company’s expectations at $5.0 billion in comparison to $9.7 billion in 3Q22. The company has raised its full-year adjusted EPS guidance from range of between $2.00 – $2.30 per diluted share to the range of $2.50 – $2.70 per diluted share. It has increased full-year adjusted EBITDA guidance from earlier range of $500 million – $600 million to ~$600 million. Revised guidance exhibited favourable advances on large Energy Solutions projects and advancements in projects in its legacy portfolio.

Conclusion

The above-mentioned are some of the best global infrastructure companies having strong growth opportunities. Infrastructure boom has come and there is a shortage of workers in overall construction sector. Investors should be cautious about this development. Of ~500,000 unfulfilled construction jobs, most of the vacancies were in the areas of welders, electricians and broadband technicians. 

Since the US continues to lag behind several other countries in development of roads, airports, and water supply networks, the Biden government pledged to rebuild traditional infrastructure and modern one for the improvement in the standard of living in the US and support local businesses.

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