Engineering & Infrastructure

During 2024, Engineering and Infrastructure equities posted positive share price performance with CRH, FLR, GVA, PWR, TPC outperforming the S&P Composite and the XLI. We believe investors welcomed continued business transformation successes and E&I firms benefiting from end-market positioning that reflected exposure to the continued strong fiscal stimulus witnessed in the US and several Western markets that accelerated funding and project lettings during 2024. Reshoring, near-shoring, electrification and select energy transition construction offered project visibility from private sector clients. Heading into 2025, we expect E&I firms will offer continued positive booking, organic revenue, profit and free cash generation growth while we watch for possible headwinds emerging from a less certain Federal Reserve policy implementation, the underlying potential for sticky inflation readings, US longer-term interest rates stifling single family housing affordability and any marginal government spending changes offered during the early stages of the new Congress. E&I equities will benefit from a business mix that should continue to gain support from more visible and tangible new business and backlog flow from the various international fiscal infrastructure and capital investment stimulus, especially through water, transportation, infrastructure, electric grid, advanced facilities,healthcare, international defense spending, traditional energy and commodity markets. We remain supportive of the several multi-year secular trends persisting that should support improved relative valuation. With anticipated deregulatory and incentive-driven investment opportunities emerging, we believe the very solid financial profiles among E&I firms will allow for up-market organic investment and an ability drive accretive capital allocation to unlock an expansive acquisition target pipeline, increased common share repurchases,and annual double-digit dividend increases. E&I firms should offer positive book-to-burn ratios given heightened demand for consulting, advisory, front-end engineering, program management services partially driven by tighter EPC supply dynamics. We believe market fundamentals support an ability to practice bidding discipline and lean into value over volumes that should support E&I firms achievement of longer-term operating and financial targets set for 2025-2027.