In this piece, we will take a look at the 11 best engineering stocks to buy for 2024. If you want to skip our introduction to the engineering and construction industry, known for its high technology and high capital expenditure, then you can take a look at the 5 Best Engineering Stocks to Buy for 2024.
If there's one thing that can be said for sure, it's that engineering is responsible for most of the technological achievements of the human race. The way we live and work has changed significantly over the course of the past century, aided by advances in transportation that see thousands of aircraft take to the skies daily and 24/7 electricity ensured by heavy duty power generators that use fossil fuels or green energy sources such as solar plants and windmills.
While engineering is also used to refer to software engineering and by extension the work of firms such as Microsoft Corporation (NASDAQ:MSFT) and Meta Platforms, Inc. (NASDAQ:META), typically, engineering stocks are those that deal with heavy duty industrial grade products or serve the needs of the construction industry. For instance, one of the most well known engineering stocks in the U.S. is the industrial giant General Electric Company (NYSE:GE). It makes a wide variety of advanced products such as turbines and jet engines, and with a market capitalization of $167 billion, the stock is just a couple of catalysts shy of transforming itself from a large cap to a mega cap.
Another example of an engineering stock is the diversified engineering and construction company Fluor Corporation (NYSE:FLR). Headquartered in Texas, the firm provides a wide variety of engineering services to the energy industry and includes other sectors such as construction in the mix as well.
As you might be starting to understand, the nature of engineering stocks means that they are exposed to a specific set of tailwinds and headwinds. For firms such as Fluor Corporation (NYSE:FLR), these can include those involving their businesses. Since a large portion of Fluor's revenue comes from oil exploration, should the world's appetite for the black gold start to shrink, then the firm's shares will drop as well Additionally, since a lot of engineering stocks provide services to the construction industry, any drop in construction activity or housing starts will naturally not bode well for the shares.
Building on this, construction activity in the U.S. is also facing the heat from high interest rates. These make it difficult for builders to raise capital for new projects and also make it harder for prospective buyers to make pricey purchases. For instance, data from the Census Bureau shows that construction activity in the United States grew moderately annually in 2023 but did mark a double digit jump in December. In 2023, the total value of construction activity was worth $1.9 trillion to mark for a small 1% annual growth while in December 2023, a total of $2 trillion was spent on construction for a more noticeable 13.9% annual growth.
Before we get to our list of the best engineering stocks, it's quite important to see what investors believe will be the timeline for U.S. interest rate cuts. After all, rate cuts stimulate economic activity and end up being a headwind for industrial and engineering stocks. On this front, data from the CME FedWatch tool shows that 53% are optimistic for a 25 basis point cut in June 2024 and this probability increases to 61% for cuts ranging between 25 basis points and 50 basis points in July. Should these expectations hold and if the economy continues to perform, then engineering stocks can also rise with the tide.
With these details in mind, let's take a look at the best engineering stocks to buy. Some top names are KBR, Inc. (NYSE:KBR), Quanta Services, Inc. (NYSE:PWR), and TopBuild Corp. (NYSE:BLD).
12 Best Engineering Stocks to Buy For 2024
A crane carrying heavy building materials, representing the robust civil engineering products of the company.
Our Methodology
To make our list of the best engineering stocks to buy, we ranked the most valuable construction and engineering firms by the number of hedge funds that had bought the shares in Q4 2023. Only those industrial companies with a significant reliance on engineering for their business were chosen.
For these best engineering stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Tetra Tech, Inc. (NASDAQ:TTEK) is an engineering services company headquartered in Pasadena, California. Its shares are rated Buy on average, and the average analyst share price target is $196.
By the end of 2023's fourth quarter, out of the 933 hedge funds covered by Insider Monkey's research, 27 had invested in the firm. Tetra Tech, Inc. (NASDAQ:TTEK)'s stakeholder in our database is Ken Griffin's Citadel Investment Group due to its $47 million investment.
Tetra Tech, Inc. (NASDAQ:TTEK) joins Quanta Services, Inc. (NYSE:PWR), KBR, Inc. (NYSE:KBR), and TopBuild Corp. (NYSE:BLD) in our list of the top engineering stocks for 2024.
APi Group Corporation (NYSE:APG) is an industrial consulting company that enables customers to work with safety systems, utility infrastructure, and other engineering areas. Its shares are up by 8.85% year to date, helped no doubt by the fact that APi Group Corporation (NYSE:APG)'s full year guidance given in February saw it upgrade the operating income forecast and share that it will be above the midpoint of the previous guidance to sit at $780 million. Delving deeper into its latest guidance, APi Group Corporation (NYSE:APG)'s management believes that in 2024, its building heating and associated projects will see their growth temper down as material costs drop.
During 2023's December quarter, 30 out of the 933 hedge funds part of Insider Monkey's database were APi Group Corporation (NYSE:APG)'s shareholders. Andreas Haloversen's Viking Global was the biggest investor as it owned a $1.1 billion stake.
Fluor Corporation (NYSE:FLR) provides a variety of utility related services that include nuclear power, mining project management, and other engineering aid. The firm's shares tanked after its fourth quarter and full year earnings report, as investors were less than impressed after a $21 million loss stunned analyst estimates of a $98 million.
During last year's fourth quarter, 32 out of the 933 hedge funds profiled by Insider Monkey had bought and owned the firm's shares. Fluor Corporation (NYSE:FLR)'s largest hedge fund shareholder is Israel Englander's Millennium Management as it owns $136 million worth of shares.
AECOM (NYSE:ACM) is a sizeable American firm that provides engineering design, construction engineering, and other associated services. It's one of the strongest rated engineering stocks on our list, with an average share rating of Strong Buy and an average share price target of $104. February 2024 also marked a win for the firm as it saw AECOM (NYSE:ACM) secure an engineering contract to build a Ontario rapid transit line covering more than 15 kilometers.
As of December 2023, 33 out of the 933 hedge funds tracked by Insider Monkey were AECOM (NYSE:ACM)'s investors. Jeffrey Smith's Starboard Value LP owned the biggest stake which was worth $167 million.
Comfort Systems USA, Inc. (NYSE:FIX) is a mechanical and electrical engineering firm that caters to the needs of the construction industry. Its shares surged by 12% in the days after the Q4 earnings results that saw Comfort Systems USA, Inc. (NYSE:FIX) beat analyst EPS estimates by delivering $9.01 as its earnings per share. Looking at the share price upside, the firm's average share price target is $275 which is lower than the current market share price of $282.
Insider Monkey scoured through 933 hedge funds for their fourth quarter of 2023 investments to find that 34 had invested in the firm. Comfort Systems USA, Inc. (NYSE:FIX)'s largest hedge fund stakeholder is Israel Englander's Millennium Management through its $56.9 million investment.
MasTec, Inc. (NYSE:MTZ) is a diversified engineering company that caters to the needs of the energy, construction, telecommunications firms, and other entities. With the latest earnings results due on February 29th, the firm is heading towards them with some momentum on the earnings front as it has beaten analyst EPS estimates in three out of its four latest quarters.
As of Q4 2023 end, 39 out of the 933 hedge funds covered by Insider Monkey's research had bought MasTec, Inc. (NYSE:MTZ)'s shares. Herbert Frazier's Hill City Capital was the biggest investor since it owned 2 million shares that are worth $156 million.
MasTec, Inc. (NYSE:MTZ), KBR, Inc. (NYSE:KBR), Quanta Services, Inc. (NYSE:PWR), and TopBuild Corp. (NYSE:BLD) are some engineering stocks that hedge funds are buying in 2024.
