The U.S. construction industry demonstrated resilience in 2024, with the Zacks Construction sector gaining 25.2%, nearly matching the Zacks S&P 500 Composite’s 27.4% rise. Robust fundamentals propelled this growth, with construction spending surpassing $2 trillion. By October 2024, spending totaled $1,814.8 billion, a 7.2% increase over the same period in 2023.

Construction Sector's YTD Performance

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Employment in the construction sector also reached new heights, with 8.3 million workers as of December 2024 (according to the Bureau of Labor Statistics) — a significant jump from the 2006 peak of 7.7 million. Notably, November alone saw an additional 10,000 jobs, marking a year-over-year increase of 2.6%. Meanwhile, the Dodge Momentum Index (DMI) signaled rising confidence among developers, indicating a healthy pipeline for nonresidential projects.

Despite these achievements, the sector faced obstacles, including elevated interest rates and persistent inflation. Challenges in the lending market and weaker architecture billings further pressured residential and commercial segments.

We have zeroed in on five construction stocks — Primoris Services Corporation PRIM, Comfort Systems USA FIX, EMCOR Group, Inc. EME, Sterling Infrastructure, Inc. STRL and MasTec, Inc. MTZ — which have witnessed at least 70% gain so far in 2024 and poised for better return in 2025 as well.

Key Drivers for 2025 Growth

Looking ahead, the construction industry is expected to grow in 2025, buoyed by positive economic trends and government initiatives. The U.S. economy’s steady performance, as reflected in a 2.8% GDP growth rate (second estimate) for the third quarter of 2024, provides a solid foundation. Consumer spending remains robust, and the Conference Board’s upgraded forecast for the fourth quarter suggests sustained momentum into the new year.

Falling interest rates also promise relief. After the 50-bps interest rate cut on Sept. 18, 2024 and the 25-bps cut on Nov. 7, the current benchmark stands at 4.5-4.75%. The cuts are anticipated to support construction demand. The National Association of Realtors (“NAR”) predicts a 9% rise in home sales in 2025, followed by a 13% increase in 2026. The NAR’s chief economist, Lawrence Yun forecasts the median home price to be 2% higher in both 2025 and 2026. Yun projects new home sales to be 11% higher in 2025 and 8% higher in 2026. Stabilizing mortgage rates around 6% and an easing housing inventory shortage are expected to further support this trend.

Lower mortgage rates could reignite residential activity, while government investments through key legislations — such as the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS and Science Act — are likely to drive growth in manufacturing and energy-related construction. Also, the increasing adoption of artificial intelligence and advanced computing is spurring demand for data centers, offering another growth avenue for the construction sector.

Navigating Challenges in 2025

While the outlook remains optimistic, certain headwinds persist. High interest rates, although declining, continue to impact affordability. Lawrence Yun notes that mortgage rates may not drop in tandem with the Fed’s rate cuts due to the U.S. budget deficit. Inflationary pressures and tight lending conditions may also weigh on segments like commercial real estate. However, slowing inflation and a supportive monetary policy environment are expected to mitigate these challenges over time.

As 2025 approaches, the U.S. construction sector is poised for moderate yet steady growth. Strong government spending, easing interest rates, and technological advancements are set to drive momentum across key segments. While challenges remain, the sector’s resilience and adaptability underscore its potential for long-term success.

5 Construction Stocks Worth Considering

Using the Zacks Stock Screener, we have identified five construction stocks that hold a Zacks Rank #1 (Strong Buy) or #2 (Buy) and have achieved gains of at least 70% in 2024, positioning them strongly for success in 2025.
 

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Primoris Services: PRIM, currently sporting a Zacks Rank #1, has gained 133.5% year to date (YTD). The 2025 earnings per share (EPS) estimate has increased to $4.15 from $3.98 over the past 60 days. Earnings for 2025 are expected to grow 20.3%. It currently holds a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum. You can see the complete list of today’s Zacks #1 Rank stocks here.

Comfort Systems: FIX, currently sporting a Zacks Rank #1, has gained 123.2% YTD. The 2025 EPS estimate has increased to $16.86 from $16.00 over the past 60 days. Earnings for 2025 are expected to grow 20.8%. It currently carries a VGM Score of A.

EMCOR: EME, currently sporting a Zacks Rank #1, has gained 120.1% YTD. The 2025 EPS estimate has increased to $22.24 from $21.50 over the past 60 days. Earnings for 2025 are expected to grow 7.2%. It currently carries a VGM Score of B.

Sterling: STRL, currently flaunting a Zacks Rank #1, has gained 107.8% YTD. The 2025 EPS estimate has increased to $6.45 from $6.02 over the past 60 days. Earnings for 2025 are expected to grow 8.1%. It currently carries a VGM Score of B.

MasTec: MTZ, currently flaunting a Zacks Rank #1, has gained 75.4% YTD. The 2025 EPS estimate has increased to $5.28 from $4.48 over the past 60 days. Earnings for 2025 are expected to grow 45.5%. It currently carries a VGM Score of A.

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EMCOR Group, Inc. (EME) : Free Stock Analysis Report

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