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As the world moves into 2025, the U.S. construction sector is witnessing a rebound on the back of a strong economic outlook. The sector’s resilience can be measured based on the underlying strength offered by the Fed rate cuts, stabilized mortgage rates and increased government spending on public infrastructure and non-residential construction.
The resilience is substantiated by the Zacks Construction sector gaining 20.8% in the year-to-date period compared with the Zacks S&P 500 composite’s 28.3% growth. Notably, the sector’s median price performance percentage nearly matches the S&P 500 composite, indicating that the former is catching up to the market due to the driving factors mentioned above.
Image Source: Zacks Investment Research
Although a still high inflationary market scenario and a slower commercial construction spending rate are likely to impact the construction sector to some extent in 2025, a rebound in the housing market and the other positive macro aspects are expected to cool down the negative flush.
With the hopeful growth trajectory of the construction sector, we have bundled up four construction stocks that are expected to offer more than 10% year-over-year earnings growth rate in 2025. The bundle consists of Construction Partners, Inc. (ROAD - Free Report) , MasTec, Inc. (MTZ - Free Report) , Comfort Systems USA, Inc. (FIX - Free Report) and Primoris Services Corporation (PRIM - Free Report) .
Favorable Factors Driving Growth in 2025
Public Infrastructure Spending: The U.S. government's several initiatives like the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) have been fueling infrastructure spending across roads and bridges, railways, airports and water systems, along with clean energy projects aimed at curbing carbon dioxide emissions. According to the recent report by the U.S. Census Bureau, as of October 2024, public construction spending in the year-to-date period rose 9.8% year over year, with residential construction increasing 9.3% and non-residential construction growing 9.8%. The major growth areas included public safety, amusement and recreation, power, water supply, commercial and office. The companies indulging in heavy construction, decarbonization and national security projects are expected to gain through 2025, given the government’s spending trajectory. The U.S. government underwent $6.75 trillion of spending in fiscal 2024 ended Sept. 30, 2024, up from $6.31 trillion in fiscal 2023.
Interest Rate Scenario: Intending to push down the inflation rate, the Fed started hiking interest rates in early 2022, setting the benchmark between 5.25% and 5.5% since August 2023. As a breath of fresh air for the market, the first rate cut by half a percentage point was exercised on Sept. 18, 2024, followed by another quarter percentage point cut in November, settling the benchmark between 4.50% and 4.75%. These decisions have boosted the investors’ sentiments over the past three months and encouraged mainly the housing market of the country.
Despite the sticky inflation rate persisting in the economy, the Federal Open Market Committee meeting on Wednesday (Dec. 18) is expected to indicate a third rate cut per the market’s anticipation. Although the market expects a slower pace of cuts in 2025, the easing of borrowing costs with the improving job market is expected to bode well.
Mortgage Rates: The average 30-year mortgage rate declined to 6.6% (on Dec. 12) from 6.69% in the previous week, according to Freddie Mac. This marks the third consecutive weekly drop, in mortgage rates, driven by new economic data that reinforced expectations of the Federal Reserve maintaining its current path for interest rate cuts. Such a scenario is deemed well for the country’s homebuilders as the homebuyers are gaining confidence in housing spending with stabilizing mortgage rates.
Per the recent report by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, the housing completions in October 2024 witnessed 16.8% year-over-year growth. Furthermore, at the National Association of Realtors (NAR) conference on Nov. 9, its chief economist, Lawrence Yun, predicted 9% increase in existing home sales and 11% growth in new home sales in 2025. He also predicted existing and new home sales to rise 13% and 8%, respectively in 2026, indicating the much-awaited recovery of the U.S. housing market. He also said that the easing inflation will stabilize the mortgage rates but they are expected to remain elevated, reflecting the new normal 30-year fixed-rate mortgage range between 5.5 - 6.5%.
Top Four Construction Stocks to Look Forward to in 2025
Using the Zacks Stock Screener, we have identified four construction stocks that sport a Zacks Rank #1 (Strong Buy) or carry a #2 (Buy), along with more than 10% of earnings estimate growth rate in 2025 with an upward share price performance trajectory in the quarter to date (QTD).
QTD Price Performance
Image Source: Zacks Investment Research
MasTec: MTZ presently sports a Zacks Rank of 1 and has risen 80.3% in the year-to-date period. It has a trailing four-quarter earnings surprise of 40.2%, on average. The 2025 earnings per share (EPS) estimate has increased to $5.28 from $4.48 over the past 60 days. Earnings for 2025 are expected to grow 45.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Comfort Systems: FIX presently sports a Zacks Rank of 1 and has surged 121% in the year-to-date period. It has a trailing four-quarter earnings surprise of 14.7%, on average. The 2025 EPS estimate has increased to $16.86 from $16.00 over the past 60 days. Earnings for 2025 are expected to grow 20.8%.
Primoris Services: PRIM presently carries a Zacks Rank of 2 and has soared 143.5% in the year-to-date period. It has a trailing four-quarter earnings surprise of 152.2%, on average. The 2025 EPS estimate has increased to $4.08 from $3.98 over the past 60 days. Earnings for 2025 are expected to grow 17.7%.
Construction Partners: ROAD presently carries a Zacks Rank of 2 and has surged 120.3% in the year-to-date period. It has a trailing four-quarter earnings surprise of 32.2%, on average. The fiscal 2025 EPS estimate has increased to $1.96 from $1.79 over the past 60 days. Earnings for fiscal 2025 are expected to grow 47.4%.
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4 Construction Stocks Building Momentum Into 2025
As the world moves into 2025, the U.S. construction sector is witnessing a rebound on the back of a strong economic outlook. The sector’s resilience can be measured based on the underlying strength offered by the Fed rate cuts, stabilized mortgage rates and increased government spending on public infrastructure and non-residential construction.
The resilience is substantiated by the Zacks Construction sector gaining 20.8% in the year-to-date period compared with the Zacks S&P 500 composite’s 28.3% growth. Notably, the sector’s median price performance percentage nearly matches the S&P 500 composite, indicating that the former is catching up to the market due to the driving factors mentioned above.
Image Source: Zacks Investment Research
Although a still high inflationary market scenario and a slower commercial construction spending rate are likely to impact the construction sector to some extent in 2025, a rebound in the housing market and the other positive macro aspects are expected to cool down the negative flush.
With the hopeful growth trajectory of the construction sector, we have bundled up four construction stocks that are expected to offer more than 10% year-over-year earnings growth rate in 2025. The bundle consists of Construction Partners, Inc. (ROAD - Free Report) , MasTec, Inc. (MTZ - Free Report) , Comfort Systems USA, Inc. (FIX - Free Report) and Primoris Services Corporation (PRIM - Free Report) .
Favorable Factors Driving Growth in 2025
Public Infrastructure Spending: The U.S. government's several initiatives like the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) have been fueling infrastructure spending across roads and bridges, railways, airports and water systems, along with clean energy projects aimed at curbing carbon dioxide emissions. According to the recent report by the U.S. Census Bureau, as of October 2024, public construction spending in the year-to-date period rose 9.8% year over year, with residential construction increasing 9.3% and non-residential construction growing 9.8%. The major growth areas included public safety, amusement and recreation, power, water supply, commercial and office. The companies indulging in heavy construction, decarbonization and national security projects are expected to gain through 2025, given the government’s spending trajectory. The U.S. government underwent $6.75 trillion of spending in fiscal 2024 ended Sept. 30, 2024, up from $6.31 trillion in fiscal 2023.
Interest Rate Scenario: Intending to push down the inflation rate, the Fed started hiking interest rates in early 2022, setting the benchmark between 5.25% and 5.5% since August 2023. As a breath of fresh air for the market, the first rate cut by half a percentage point was exercised on Sept. 18, 2024, followed by another quarter percentage point cut in November, settling the benchmark between 4.50% and 4.75%. These decisions have boosted the investors’ sentiments over the past three months and encouraged mainly the housing market of the country.
Despite the sticky inflation rate persisting in the economy, the Federal Open Market Committee meeting on Wednesday (Dec. 18) is expected to indicate a third rate cut per the market’s anticipation. Although the market expects a slower pace of cuts in 2025, the easing of borrowing costs with the improving job market is expected to bode well.
Mortgage Rates: The average 30-year mortgage rate declined to 6.6% (on Dec. 12) from 6.69% in the previous week, according to Freddie Mac. This marks the third consecutive weekly drop, in mortgage rates, driven by new economic data that reinforced expectations of the Federal Reserve maintaining its current path for interest rate cuts. Such a scenario is deemed well for the country’s homebuilders as the homebuyers are gaining confidence in housing spending with stabilizing mortgage rates.
Per the recent report by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, the housing completions in October 2024 witnessed 16.8% year-over-year growth. Furthermore, at the National Association of Realtors (NAR) conference on Nov. 9, its chief economist, Lawrence Yun, predicted 9% increase in existing home sales and 11% growth in new home sales in 2025. He also predicted existing and new home sales to rise 13% and 8%, respectively in 2026, indicating the much-awaited recovery of the U.S. housing market. He also said that the easing inflation will stabilize the mortgage rates but they are expected to remain elevated, reflecting the new normal 30-year fixed-rate mortgage range between 5.5 - 6.5%.
Top Four Construction Stocks to Look Forward to in 2025
Using the Zacks Stock Screener, we have identified four construction stocks that sport a Zacks Rank #1 (Strong Buy) or carry a #2 (Buy), along with more than 10% of earnings estimate growth rate in 2025 with an upward share price performance trajectory in the quarter to date (QTD).
QTD Price Performance
Image Source: Zacks Investment Research
MasTec: MTZ presently sports a Zacks Rank of 1 and has risen 80.3% in the year-to-date period. It has a trailing four-quarter earnings surprise of 40.2%, on average. The 2025 earnings per share (EPS) estimate has increased to $5.28 from $4.48 over the past 60 days. Earnings for 2025 are expected to grow 45.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Comfort Systems: FIX presently sports a Zacks Rank of 1 and has surged 121% in the year-to-date period. It has a trailing four-quarter earnings surprise of 14.7%, on average. The 2025 EPS estimate has increased to $16.86 from $16.00 over the past 60 days. Earnings for 2025 are expected to grow 20.8%.
Primoris Services: PRIM presently carries a Zacks Rank of 2 and has soared 143.5% in the year-to-date period. It has a trailing four-quarter earnings surprise of 152.2%, on average. The 2025 EPS estimate has increased to $4.08 from $3.98 over the past 60 days. Earnings for 2025 are expected to grow 17.7%.
Construction Partners: ROAD presently carries a Zacks Rank of 2 and has surged 120.3% in the year-to-date period. It has a trailing four-quarter earnings surprise of 32.2%, on average. The fiscal 2025 EPS estimate has increased to $1.96 from $1.79 over the past 60 days. Earnings for fiscal 2025 are expected to grow 47.4%.