2 Engineering & Construction Stocks You Can Buy and Hold for the Next Decade

Two prominent engineering and construction stocks are buying opportunities before the industry rebounds and grow in the next decade.

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Some industries that have slowed or shrunk due to high interest could make a comeback this year and resume growth. In Canada, construction investments rose to record levels in 2022 because of the booming residential and industrial sectors. However, the high interest rate scenario and persistent inflation significantly reduced demand for real estate.

According to JLL, a global real estate and investment management services firm, Canada’s construction industry is ready to meet the challenges in 2024. “With immense housing needs, return to office strengthening and federally backed infrastructure and manufacturing accelerating, the industry is poised for growth despite challenges,” said Todd Burns, JLL’s president for Project and Development Services.

On the TSX, Aecon Group (TSX:ARE) and Bird Construction (TSX:BDT) in the engineering and construction industry performed well last year amid massive headwinds. You can buy and hold the engineering and construction stocks for the next decade.

Legacy projects

Aecon president and chief executive officer (CEO) Jean-Louis Servranckx maintains a favourable business outlook. “With a backlog of $6.2 billion and recurring revenue programs continuing to see robust demand, we believe we are well-positioned to achieve further revenue growth over the next few years,” he said.

The $900.7 million construction and infrastructure development company caters to private and public clients. The Concessions segment provides project development, financing, investment and management services. During the first nine of 2023, Aecon secured several projects during the first three quarters of 2023 in addition to four ongoing large fixed-price legacy projects.

Management said Aecon is prequalified on many project bids and expects to receive the awards in the next 12 months. Several pipeline opportunities should boost backlog over time. In the nine months that ended Sept. 30, 2023, profit soared 1,322.4% year over year to $152.2 million.

Aecon is a development partner for the Scarborough Subway Extension Stations, Rail and Systems project. It also participates in various consortiums and projects like the Nuclear Generating Station and the long-term GO Expansion On-Corridor Works in Ontario.

At $14.58 per share, the year-to-date gain is 11.55%, while the trailing one-year price return is 44.19%. Current investors partake in the juicy 5.08% dividend.

Ready to fly

Bird Construction carries a buy rating from market analysts with a high price target of $20 in 12 months. As of this writing, the stock trades at $15.24 per share (+6.08% year to date), 78.01% higher than a year ago. BDT pays a decent 3.71% dividend. Also, the board recently approved a 30.2% increase in the monthly dividend.

The $819.5 million company provides construction services in Canada’s major markets. Its president and CEO, Teri McKibbon, said, “Bird is positioned as a leading collaborative construction and maintenance company focused on the industrial, institutional and infrastructure markets.”

McKibbon added that the primary focus is balancing investment in profitable long-term growth with sustainable distributions to shareholders. Bird enjoys positive business momentum, as evidenced by the financial results in the first three quarters of 2023. In the said period, construction revenue and net income rose 16.6% and 36.4% year over year to $2 billion and $47.6 million.

Positive outlook

JLL maintains a positive outlook for the construction industry. It also said a rebound is possible in the spring of 2024 if inflation eases and debt markets stabilize. Aecon and Bird Construction are ahead and started strong this year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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