A combination of new taxes, a new highway bill and the entry of private equity into government projects has been driving the industry's advance, says William Bremer
, senior industrial and infrastructure analyst at Maxim Group
in New York.
Some state and local governments, seeking to make up lost revenue from the commodity crunch, raised gasoline taxes and other fees, which provided some new funding.
Then in December, a five-year, $305 billion federal highway bill was signed into law.
After years of patchwork funding, the bill gave governments the ability to move forward on major road and bridge projects.
In addition, Bremer
says, private equity firms have been partnering with some government agencies on public works projects.
That has helped governments limit risks.
Labor-force trends also favor construction companies.
A couple of the group's leaders started rallying after their earnings reports and have broken out of bases.
Granite Construction (GVA) -- on which Bremer
has a buy rating and a 50 price target -- is a bit extended from a 44.50 buy point.
The roadway construction company has a backlog of $2.9 billion.
"It's staggering what's coming down this pipeline," he
told IBD Wednesday.