Citi Highlights Top E&C Stocks Poised to Beat Q3 Earnings

Engineering and construction (E&C) companies are well-positioned to meet or surpass consensus estimates in the upcoming third-quarter earnings season, driven by robust backlogs and operational improvements. That's according to a new note from Citi analyst Andrew Kaplowitz, who remains constructive on the sector despite growing market concerns over the momentum of artificial intelligence infrastructure spending.

Sector Outlook and Valuation

While acknowledging potential project delays from affordability concerns and political scrutiny around data centers, Citi suggests these are more likely to extend the investment cycle rather than disrupt it. The firm's industry discussions indicate that demand for AI-related infrastructure continues to outpace supply, reinforcing a multi-year investment trend.

Kaplowitz also highlighted the sector's valuation as an attractive entry point for investors. The E&C sector currently trades at 0.82x its next-twelve-month price-to-earnings ratio, below its long-term average of 0.89x. The analyst added that constrained power availability further supports a positive outlook for companies involved in utilities and power generation markets.

Ad

Citi's Top E&C Picks

Citi identified four companies with strong fundamentals and growth prospects heading into the earnings period:

• Quanta Services (PWR): Citi's top pick, the firm has high conviction in Quanta's ability to beat guidance and deliver durable growth. The company's $53 billion backlog, scale, and specialized capabilities position it to benefit from power generation and transmission projects needed to support data centers.
• MasTec (MTZ): Recent underperformance has created an attractive entry point, according to the note. MasTec's $20.3 billion backlog, up 28% year-over-year, and a 1.6x book-to-bill ratio in key segments provide strong revenue visibility.
• Fluor Corporation (FLR): Improving bookings momentum is expected to support earnings upside. Citi views the coming quarters as "target-rich" for bookings in data centers, mining, and power, while a $1.4 billion share repurchase target for 2026 provides additional support for earnings growth.
• Jacobs Solutions (J): The company's $28.8 billion backlog, up 27% year-over-year, and exposure to advanced manufacturing and infrastructure markets are key strengths. Citi sees potential for margin expansion through productivity gains and other self-help initiatives.