This sector is uniquely positioned to capture infrastructure spend growth: analyst

Investing.com -- In a note to clients this week, analysts at Jefferies highlighted one sector that they believe is well-positioned to profit from the growth in infrastructure spending. 

Specialty engineering and construction (E&C) firms are poised to benefit from a wave of infrastructure investment, according to Jefferies analysts, who reaffirm a bullish view on the sector. 

“The Specialty E&C sector looks uniquely positioned to capture growth in infrastructure spend,” the note said, citing long-term drivers like electrification, grid modernization, and gas midstream build-out.

Despite recent outperformance — Specialty E&C is up 12.1% year-to-date versus 2.6% for the S&P 500 and 8.7% for Industrials — Jefferies sees continued upside. 

“With superior growth, robust end-markets demand through decade-end, and catalysts, we see this premium as sustainable,” analysts wrote, adding that estimate revisions have been “notable” and momentum remains strong after first-quarter results.

Jefferies highlighted multiple tailwinds: “large project awards, backlog momentum, margin expansion, demand acceleration, and skilled-labor market tightening.” 

They expect ongoing confidence into the second quarter, particularly in renewables, where the 2025/2026 outlook is encouraging.

According to the firm, the sector’s fundamentals remain strong, with consensus estimates projecting a 16.2% EBITDA CAGR from 2024–2026, well above the 9.6% projected for both the S&P 500 and broader Industrials. 

Jefferies adds that EPS is expected to grow at a 35.8% clip, compared with 11.5% for the S&P 500.

While the sector now trades at a 2.3x premium to the S&P 500 on FY2 P/E, Jefferies argues this reflects a shift in investor perception: “Emerging trends in a niche infrastructure market create new premium-to-market dynamics.”

When it comes to the biggest risk, the firm highlighted delays in renewable project development due to potential modifications to the Inflation Reduction Act. 

Still, Jefferies sees larger E&C firms gaining share as the sector consolidates.