Four Infrastructure Stocks with Room to Run

Analysts at UBS UBS expect delayed infrastructure and public works projects to pick up steam as the U.S. economy slowing regains its footing. While the pace of it has been slow so far this year, pent up demand could push things along in the second half of the year and especially in 2014. Four of the stocks that made the UBS list of infrastructure stocks to buy have implied upside of more than 15 percent, comparing the analysts' mean price target to the current share price. They are Chicago Bridge & Iron CBI, Foster Wheeler FWLT, KBR KBR and McDermott International MDR. We take a glance at how these four stocks have fared and what analysts expect below. Other UBS infrastructure picks include AECOM Technology ACM, Quanta Services PWR and Tutor Perini TPC. Chicago Bridge & Iron This Dutch energy infrastructure company reported better-than-expected first-quarter results last week, despite acquisition-related costs. Headquartered in The Hague, Chicago Bridge & Iron sports a market capitalization of more than $5 billion and offers a dividend yield of about 0.4 percent. The price-to-earnings (P/E) ratio is higher than the industry average, but the long-term earnings per share (EPS) growth forecast is more than 12 percent. The operating margin is better than the industry average, and the return on equity is more than 17 percent. Of the 16 analysts surveyed by Thomson/First Call who follow this stock, 12 recommend buying shares, including three that rate the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, indicates more than 16 percent potential upside. That target would be a new multiyear high. Shares of Chicago Bridge & Iron are up about 19 percent year-to-date, including an almost five percent pop in the past week. Over the past six months, the stock has outperformed the broader markets and the other infrastructure companies featured here. Foster Wheeler This Swiss engineering and construction company said last week that its first-quarter EPS and revenue declined from the year-ago period, and this week it won a contract for a refinery upgrade in Russia. Foster Wheeler offers no dividend, and its market cap is more than $2 billion. The long-term EPS growth forecast is almost 16 percent, but the P/E ratio is greater than the industry average. The operating margin is less than the industry average, but the return on equity is more than 19 percent. Short interest is near three percent of the float. Nine of the 16 analysts surveyed recommend buying shares, and none recommend selling. The mean price target implies about 19 percent potential upside, relative to the current share price. But note that the consensus target is less than the 52-week high reached in late January. Shares are trading more than 13 lower than they were at the beginning of the year, mainly due to a sell-off in late March and early April. Over the past six months, this stock has underperformed the broader markets and competitors Fluor FLR and Jacobs Engineering JEC. KBR This engineering and construction company, and former subsidiary of Halliburton HAL, won a contract for a road and rail project in Australia this week. Houston-based KBR has a market cap of a more than $4 billion, and its dividend yield is about one percent. KBR's forward earnings multiple is less than the industry average P/E ratio. The long-term EPS growth forecast is about 12 percent. But the return on equity is less than six percent. And the number of shares sold short represents more than six percent of the company's float. Eleven of the 16 analysts polled recommend buying shares, with three of them rating the stock at Strong Buy. The analysts believe KBR has plenty of head room, as their price target is more than 20 higher than the current share price. Shares have not seen that level since July of 2011. The share price is up only marginally year-to-date but it is about 12 percent higher than six months ago. But in that time, the stock has underperformed the likes of Halliburton and Jacobs Engineering, as well as the broader markets. McDermott International This Houston-based engineering and construction company is expected to post a year-over-year EPS decline for the first quarter, but marginal revenue growth, when it reports this week. The company has a more than $2 billion market cap, though it offers no dividend. The P/E ratio is a lower than the industry average, and the long-term EPS growth forecast is almost 17 percent. But the return on equity is less than 12 percent. The short interest is about nine percent of the McDermott's float. Out of 18 surveyed analysts, 13 recommend buying shares, and only one rates the stock at Underperform. Their mean price target is more than 22 percent higher than the current share price. That target would be a new 52-week high, and a positive earnings surprise could raise price targets even more. Shares have traded mostly between $10.00 and $11.50 since the beginning of March. Over the past six months, the stock has outperformed Foster Wheeler but underperformed Chicago Bridge & Iron and the broader markets.